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MRP freezes energy price until April 2015

MightyRiverPower [NZX: MRP], the first state-owned power company to be partially privatised by the government this year, plans to keep the price it charges for electricity on hold until at least April 2015, but can't guarantee transmission and distribution prices won't rise.

The energy component of a power bill is between 50 and 60 percent of the total and the Auckland-based company says it won't move that element of its prices for gas or electricity residential customers as it waits for looming regulatory changes on lines companies and grid operator Transpower.

It will then assess the impact of any tweaks, it said in a statement. The regulation is expected to be set in the coming two months. A long awaited High Court decision on a merits review of the Commerce Commission's approach to regulated pricing for electricity and gas distribution is expected today.

"We are now confirming that for our customers there will be no increase in our energy prices for a further 15 months," chief executive Doug Heffernan said. "However, there will likely be changes in customer pricing from April 1 due to variables over which we have no control that we pass through on our bills - such as transmission and distribution charges and any increases in metering costs due to regulatory requirements."

MRP's move comes at a time when electricity policy becomes increasingly politicised, with Opposition parties promising to overhaul the industry structure by introducing a central wholesale buying agency as a means to keep retail prices low.

"Our decision to hold energy prices is the result of a healthy, well-functioning electricity market that has, by global measures, delivered positive outcomes for both customers and the country, enabled by the multi-billion dollar investment in renewable generation capacity by a number of competing generators over the last few years," Heffernan said.

Government figures show electricity consumer prices rose at an annual pace of 3.6 percent in the September quarter, and gas prices increased 0.7 percent. That compares a 1.4 percent annual increase in the overall consumer price index.

Last month MRP affirmed its forecast for annual earnings growth of 27 percent to $498 million in the year ending June 30, 2014.

The company's shares were unchanged at $2.025 in trading yesterday, and have dropped 19 percent from the $2.50 offer price in the May float. MRP embarked on a share in October as a means to prop up the price.

Meanwhile, Meridian Energy has released its monthly operating report for October. In short, so far this financial year Meridian’s retail sales volumes remain largely unchanged from the same period last year.

The average price Meridian received for its generation in October was 14% lower than the same month last year, largely reflecting the higher than average hydro storage position.

And the price Meridian paid to supply contracted sales in October was 22% lower than the same month last year.

Other highlights included:

* Second highest October inflows into Meridian’s catchments in 81 years of records

* Meridian’s Waitaki storage was at 199% of historic average at the end of the month

* Monthly market switching rates remained high with 36k switches reported in October

* Demand remained relatively flat compared to October 2012

Comments and questions
4

In other words there will be a price increase if transmission and distribution prices increase which is 40-50% of the end user bill.

Unison will definitely increase it's line charges, as the chairman is ex Farmlands, and he oversaw huge price increases in the rural sector, to such a degree he had to move on, as he couldn't squeeze anymore out of the market without incredible embarrassment, we all know at the top, the pat on the back comes from huge increased profits, so every year the bottom line has to exceed the previous one by a decent sized gap, so you can bet on Unison's line charges will continue towards the sky, plus not to mention, that we the consumers, have to self fund our annual dividend despite the fanfare.
If MRP manages to keep it's word good on them!! as Power bills are by far, a households largest single expense outside of food.

And while weak demand is leading to prices falling elsewhere in the world, MRP's proposal avoids having to do so while appearing to do business and residential customers a favour!! A victory for spin???

A better interpretation is that they are ruling out energy price decreases for residential customers.Confirms the need for regulation to protect us as this market clearly is not working!

The commercial and industrial sectors have done well over the years - but lack of market power for the long suffering residential consumer combined with lack of insight by industry "leaders" has led to this situation.The industry has itself to blame.