Mercury surprise: power prices cut by 1.4%

Mercury Energy, the electricity retailer owned by partial privatisation candidate Mighty River Power, has announced its first across-the-board price cuts in a decade.

The cuts average 1.4 percent for most of its customers in its home territory, Auckland, and will apply from April 1.

Individual customers may see smaller or larger decreases, and in some cases an increase.

The cut is credited to an order by the government's competition watchdog, the Commerce Commission, to the owner of Auckland's electricity network, Vector, to cut its prices because it has been earning higher than allowable rates of return.

The last such across the board cut for residential customers was in 2002-03, a Mercury spokesman says.

However, Mercury is holding back some of the cut to make a 2.9 percent increase in the cost of the energy it delivers down the lines.

Vector is still fighting the price regulation findings in the courts, and further adjustment to the charges could yet ensue. But Mercury is passing on the reduction from April 1 – timing that coincides neatly with the likely timetable for the planned partial privatisation of its parent, state-owned MRP.

Assuming the Maori Council is unsuccessful in its challenge to the planned sales in a Supreme Court hearing later this month, the government's intention is to sell up to 49 percent of MRP, while maintaining a controlling 51 percent stake in taxpayers' hands before June 30.

The price cut comes after a year in which electricity prices rose by an average of 5.2 percent across the country, against the tide of total inflation for the year of 0.9 percent, according to Statistics New Zealand's consumers price index for the December 2012 quarter, released last week.

The value of the reduction per household on average is about $2.50 a month, Mercury says in a statement.

Mercury general manager James Munro says the impact of distribution and transmission charges account for more than 40 percent of the monthly power bill, the majority of which is the local distribution charge.

"Combined with an increase in the transmission charges from Transpower [the national grid operator], which are also regulated under the Commerce Act, total lines charges are decreasing by an average 7.5 per cent.

"Within the overall review of our prices, Mercury Energy has increased its energy charge by 2.9 per cent to meet general cost pressures within our retail business," he says.

"The energy charge accounts for just under 60 per cent of the total bill."

Prices for other regions will be available in coming weeks, once all distribution company and Transpower charges are known.

(BusinessDesk)