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Brownlee Rules Out Power Refunds

Contributor:
Fuseworks Media
Fuseworks Media
Gerry Brownlee
Gerry Brownlee

Wellington, May 22 NZPA - Power companies will not be expected to pay back $4.3 billion in overcharging, Energy Minister Gerry Brownlee said this morning.

A Commerce Commission report released yesterday found the big four generator-retailers -- state-owned Mighty River Power, Genesis and Meridian and listed company Contact Energy -- didn't break the law but used their market muscle to maximise profits, hiking prices 72 percent between 2000 and 2008 while inflation went up only 29 percent.

Speaking on Radio New Zealand Mr Brownlee said refunds were not an option. He pointed out the report looked at the wholesale not the retail market, but also it was too difficult.

"Most of this happened in the past, it happened over the seven years up to 2007," he said.

"The 2008 year hasn't been part of the assessment...you've got to remember to that the household sector is just on a third of all electricity use so it becomes very, very difficult to work out who actually has paid for what."

Mr Brownlee yesterday warned power companies not to hike prices this winter while the issues were looked into.

"I'm saying it would be an audacious act on the part of any power company to raise electricity prices while they've got this sort of allegation hanging out there," Mr Brownlee said.

"Quite clearly there are flaws with the way electricity is marketed in New Zealand that lead to perverse results demonstrated in this report."

Mr Brownlee was committed to doing something about it.

He was waiting for the results of a ministerial review he set up this year with a brief ranging from price capping to the market structure itself.

He expected initial findings this September but expected more complex issues to take longer.

The previous government ordered the commission inquiry in late 2005 after complaints about high prices, big company profits and allegations of anti-competitive behaviour.

The report released yesterday said there was no evidence of anti-competitive behaviour or attempts to hinder competitors.

However, analysis by international specialist Professor Frank Wolak of Stanford University found prices charged in the wholesale electricity market from January 2001 to July 2007 delivered $4.3b more than would have been earned under competitive conditions.

Labour's energy spokesman Charles Chauvel said the companies had behaved in a way unacceptable to most people.

He warned against any attempt by the Government to secure higher dividends from the state-owned companies.

"The report shows why this would be a terrible idea...Kiwi families must come before government dividends and reform must be a priority."

Mr Brownlee said the Government was telling state owned enterprises to lift their act, but that did not necessarily mean price hikes.

"I don't think anyone should assume that better performance simply means higher price," he told RNZ.

"In most cases it means exactly that, better performance, better delivery to customers and I suppose you'd say better service as well."

NZPA

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