Power gentailer Mercury says it isn’t abusing its market power, pointing out it supplies products to independent retailers including Electric Kiwi.
On Wednesday, Electric Kiwi said it lodged a complaint under the Commerce Act about power generator-retailers such as Mercury, claiming the “big four” of Mercury, Genesis, Contact and Meridian were using their market dominance to squeeze out competitors.
The four hold about 85% of the market.
Mercury chief financial officer William Meek said the company “refutes” Electric Kiwi’s claims, and said it supplied products to a range of power retailers including Electric Kiwi.
Electric Kiwi said access to hedged wholesale products from generators allowed independent retailers to cover variations in electricity usage across the day.
“A lack of access to peak products (that cover mornings and evening peaks), as well as huge escalations in wholesale costs, are driving independent retailers out of the market,” Electric Kiwi chief executive officer Luke Blincoe said.
Meek said the market was highly competitive.
He said NZ’s electricity market had enabled “massive” investment of capital in renewable generation, while keeping residential electricity price increases lower than inflation.
Meridian said it hadn't seen the complaint so couldn't comment. Genesis and Contact, the other so-called gentailers have not responded to requests for comment.
The Commerce Commission says it's reviewing the information Electric Kiwi supplied.
Electric Kiwi also took aim at industry regulator the Electricity Authority, claiming it had failed to act on competition problems in the sector.
Chief executive Sarah Gillies said its review into competition in the wholesale market “did not draw any definitive conclusions on the exercise of market power”.
A review of competition in the wholesale market was completed in October 2021 due to sustained high electricity prices.
The review found there was some evidence generators may have exercised market power, however, “evidence was lacking for structural interventions to address market power”.
Gillies said the Authority "actively and transparently" monitored the exercise of market power in the spot market and reported this analysis weekly.
She said it referred matters to the competition watchdog Commerce Commission where appropriate, and it was appropriate complaints about misuse of market power were dealt with by the Commission.
“The Authority is constructively working with smaller retailers to update them on our plans to improve how we monitor the retail market so we build a better evidence base to make decisions in the future.”
Gillies said it was “exploring better information sharing processes and obligations with the Commerce Commission on any information the Authority collects that may raise concerns about anti-competitive practices, including collusion or misuse of market power”.
“Additionally, we will consider options to strengthen wholesale market competition if new information arises on the exercise of market power or impediments to competitive entry, as part of our monitoring or other activities and investigations.”
What’s behind power prices
The Authority found elevated power prices over the review period did not always match underlying supply and demand conditions, and high electricity prices reflected gas supply uncertainty and other market conditions.
It identified one “clear and pressing issue”.
Large wholesale supply contracts at prices “that might be inefficient” had the potential to distort the market, it said. It amended the Electricity Industry Participation Code 2010 to prohibit “Materially Large Contracts” unless certain conditions were met, required disclosure of such contracts, and provided a voluntary clearance process.
It said the pipeline of new renewable generation was thin, but it warned transitioning to 100% renewable electricity generation may increase market power of some generators during extended periods of cold weather with little wind and sun.
“More and faster investment in generation and focus on monitoring and enforcement is currently the best strategy to promote competition in the wholesale electricity market.”
Meek said Mercury had completed construction of NZ’s largest wind farm at Turitea near Palmerston North and had begun commissioning a windfarm near Gore.
Combined these windfarms were worth well over $500 million, Meek said.
“We are also expecting to commit up to $1 billion over the next financial year in new renewable generation for New Zealand.”
Meek said renewable investment was ahead of where it needed to be, and a independent report confirmed there was more than twice the renewables than is needed by 2030 in the pipeline.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.