Electric Kiwi takes complaint over ‘big four’ power firms to Commerce Commission

Power retailer Electric Kiwi has filed a complaint with the Commerce Commission accusing Meridian, Mercury, Genesis and Contact of “abusing their market dominance” in the electricity industry.

Electric Kiwi has long voiced dissatisfaction with the structure of the power market and the position of independent retailers such as itself, which rely on buying power from the big four generators.

Chief executive Luke Blincoe said the four “gentailers” had been able to exercise their power in both the wholesale and retail electricity markets to “squeeze out competition and keep the prices heading upwards for New Zealand businesses and families”.

The complaint comes soon after the big four power firms posted their largest-ever annual increase in their combined operating profits, which totalled about $2.7 billion in the year to June 30.

Blincoe said a key issue was the big four were wholesaling electricity in a way that made it hard for independent retailers to meet peak demand in the morning and evening peaks, and because of a “huge escalation in wholesale costs” which he said was driving independent retailers out of the market.

“We have been saying for a long time now that the gentailers are misusing their power in wholesale markets by refusing to supply ‘shaped’ hedge products to non-vertically integrated retailers, including Electric Kiwi. In the past five years we have seen more than 20 retailers leave the market,” he said.

Electric Kiwi had filed the complaint now because the Commerce Act had been changed in April to make it easier for the commission to target practices that were anticompetitive, without having to prove intent, Blincoe said.

Another factor was that it had been waiting for the four gentailers to post their annual results, so it could see the detail of how their business units were performing, he said.

Blincoe said it had turned to the “section 36 provisions” of the Commerce Act, which target behaviours that have an anticompetitive effect, because the Electricity Authority had “failed to act decisively on any of these problems”.

“We have confidence that the Commerce Commission will take the issue seriously,” he said.

Blincoe said that in his view the Electricity Authority, which is the industry-specific regulator for the sector, should be embarrassed that Electric Kiwi had felt it necessary to turn to the Commerce Commission.

“The whole thing could have been prevented with their earlier intervention, but at the point it’s at now, it is out of their hands and, yes, they should be embarrassed by that.”

His confidence that the commission would take the complaint seriously was based on the fact that the Commerce Act had changed and Electric Kiwi had put together “a very detailed and compelling case that explains the issues in the market”, rather than any direct feedback from the commission, he said.

Electricity Authority chief executive Sarah Gillies said it was appropriate that complaints about the misuse of market power were dealt with by the Commerce Commission and the authority was looking at ways to better share any information it had on competition concerns with the commission.

Its own previous review into competition in the wholesale market did not draw any definitive conclusions on whether market power was being exercised, she said.

“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.”

Mercury chief financial officer William Meek rejected Electric Kiwi’s claim of “market abuse” saying it supplied shaped hedge products to the company and a range of other retailers.

“The market is highly competitive, which is a good thing as consumers have a range of options,” he said.