The Electricity Authority has put a temporary block on big low-price power deals to stop consumers unfairly paying the cost.
It has made an urgent and surprise amendment to the industry code which stops power companies doing deals to supply more than 150 megawatts without its approval.
The ban follows news that the Tiwai Point aluminium smelter was starting talks for power supply to stay open after 2024.
"The authority last year observed that there was the potential for electricity contracts of a certain size to have adverse impacts on other consumers," says the authority's general manager of market policy, Andrew Doube.
The smelter's 2021 cut price deal with Meridian and Contact, believed to be less than four cents a unit, would not be affected by the ban but highlighted the consequences for other consumers.
"The authority estimated the impact of the contract could potentially lead to households paying up to $200 extra on their electricity bills each year.
"This is because the cut-price electricity deal negotiated to keep the smelter operating could have been less than the cost of producing the electricity, effectively maintaining demand and keeping prices high in the wholesale market."
He says the deal is estimated to have cost general consumers as much as $850 million a year, which has been pocketed by generators.
"While the authority did not definitively determine that the Tiwai contract was inefficient, it considered that a timely and targeted intervention was required. This is all the more urgent given the recent announcement that NZAS is seeking to negotiate a new deal with generators when its current contract expires at the end of 2024."
Under the nine-month ban, power companies will not be able to do supply deals unless the buyer can sell unused electricity, the net value of the contract is positive, or there is specific clearance given by the Electricity Authority.
The current Tiwai contract is the only one, which would have fallen under the new rules, but Doube says it's aware that others are being contemplated that could shift prices.
During the ban the authority will consult on a permanent change to the industry code.
2 comments
Electric Shock.
Posted on 19-08-2022 08:31 | By Yadick
The price of electricity is just horrendously ridiculous. I feel really sorry for people paying massive overpriced rents and then get these huge power-bills. What about our elderly that have been to hell and back to help give NZers their freedom and their golden happy years are spent cold, hungry and struggling financially. Labor can be absolutely ashamed of themselves. A Winter Power Rebate is an excuse to not give them their (miserable) $300 payment but can send it off-shore to non- deservers because it's in the too hard basket. SHAME ON YOU LABOR allowing these extortioning power companies to monopolise New Zealand. This minor step won't do much at all, if anything. It's time you woke up Jacinda and realized that for most NZ'ers the struggle is very real not just a fairy tale and something to score a few votes on by talking about it. Roll on elections.
@Yadick
Posted on 20-08-2022 13:31 | By morepork
Hear! Hear! 100% right on. Electricity has been a HUGE rort in this country for far too long. The money that SHOULD have gone into re-investment in a decent network has gone into the pockets of generators and power companies. So, some drunken idiot hits a power pole and a whole community is without power for hours because there is no alternative routing possible (which is the whole idea of reticulation; you have backup and alternative paths for supply.) It is SHAMEFUL, as you say. I have lived in 3rd world countries with more reliable power supply than here.
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