Southpower Shows Need for Further Electricity Reform

Price increases to customers should not be boosting power company profits and shareholder dividends, Energy Minister Max Bradford said today.

"Today's price rise from Southpower illustrates exactly why there is a need for further reform to introduce competition at the power companies' end of the electricity market," Mr Bradford said.

Southpower has stated that its 4.9 % increase in prices ($55 a year to the average residential consumer) is 40% to cover the removal of the South Island subsidy, while 60% is to "ensure Southpower continues to be a successful business."

Mr Bradford said if Southpower was passing the removal of the subsidy on to each customer in proportion to their electricity bills, then the average domestic consumers bill (which is about $855 per annum) would rise by $17 a year.

That was not consistent with the amount Southpower had attributed to the differential.

"If consumers had choice of supplier, I doubt they would choose one which hiked prices to run their business and boost dividends for their shareholders - in this case the Christchurch City Council - rather than achieving a better result through efficiency and cost cutting."

Mr Bradford said he was unimpressed with the announcement of a price freeze to 1999: "In reality that is little more than a year. The Southpower board deserves to be challenged by consumers."

Mr Bradford said the Government was actively working on a package of further reform for the electricity industry, which should be finalised by the end of the year.

"The Government will do whatever it takes to get the benefits of competition - that is lower prices, choice of supplier and better services - to residential consumers."

Mr Bradford added that the wholesale market was delivering an average price differential of around 14% in favour of the South Island, after the removal of the $10.9 million Government subsidy.