Price spike driving out power retailers
As many as three independent electricity retailers are expected to close in the coming weeks because of an unprecedented spike in wholesale electricity prices they say is caused by the big five 'gentailers'.
Nelson-based retailer Power Direct told Powerswitch it would not accept new customers on Thursday. It is encouraging its 250 customers to move away to another retailer.
"We're telling all our customers to switch away from us," Power Direct CEO Lester Binns told Newsroom.
"This price spike is a once in a lifetime situation. We can't understand why it is as high as it is," he said.
He said the best thing Power Direct could do for its customers was to recommend they move away to other providers.
Wholesale prices have more than quintupled in the last month and are forecast to stay high because lake levels are low and the Pohokura gas field supplying electric power generators was out of action.
"The lake levels are a little low, but that just doesn't add up to how high it's risen and I just can't understand it," Binns said, adding he hoped the big five power gentailers weren't manipulating the market.
Other wholesale-plus retailers are feeling the pain and have called for an inquiry into the price spike.
Flick Electric, which is one of the bigger independent retailers that passes on wholesale prices to customers with a fee, moved last weekend to offer its 24,000 customers a 'fixie' contract with a six month term.
Flick Electric CEO Steve O'Connor told Interest around 20 percent of Flick's customers had opted for the fixed contract in the first week.
He called for the Electricity Authority and the Government to look into the current situation, which has seen prices rise from less than 10 cents per kilowatt hour to over 100 cents.
The gentailers have blamed lower lake levels and outages of gas supplies for the spike, but O'Connor said the scale of the spike was similar to the full dry winter crisis of 2008, when there was a genuine shortage.
"Our Freestyle customers are paying the generators - Genesis, Mercury, Meridian, Contact and TrustPower - at a level that does not correlate with the costs of generating and supplying electricity," he said.
"It is opportunism driven by a lack of competition. We are elevating this issue with the regulators on behalf of our customers and all New Zealanders who deserve a properly functioning market that enables product innovation and consumer choice."
The Electricity Authority has said it was watching the situation, but did not see the situation as unprecedented. It did not suggest intervention.