Gentailers have raised prices 8% for two years running while banking sky-high profits. Now the Electricity Authority is formally asking why, writes Catherine McGregor in today\u2019s excerpt from The Bulletin.<\/p>\n
To receive The Bulletin in full each weekday,\u00a0sign up here<\/a>.<\/p>\n The regulator steps in<\/p>\n The Electricity Authority has formally asked all power companies with more than 1% market share to explain their latest price increases. As\u00a0The Post\u2019s Tom Pullar-Strecker reports<\/a>, the EA estimates that households face an average 8% rise going into winter \u2013 on top of last year\u2019s 8% \u2013 with Stats NZ reporting that electricity prices were up 12.5% over the year to March 2026. EA general manager Andrew Millar acknowledged that lines charges account for \u201caround one-half to two-thirds\u201d of the increases, but made clear that did not fully explain them. \u201cWe want to know what else may be pushing prices up,\u201d he said. What the EA can actually do about whatever it finds is less clear.<\/p>\n It\u2019s all about generation<\/p>\n The reasons for the EA\u2019s disquiet are obvious. In February Meridian, Contact, Mercury and Genesis announced a 42% increase in their combined operating profits for the six months to December, totalling $1.85 billion. Broker Forsyth Barr forecasts Meridian is on track for an 89% net profit increase for the full year, boosted by a near-record March quarter and \u201ca high level of financial sales at a below average cost to supply\u201d.<\/p>\n In a\u00a0separate analysis for The Post<\/a>, Pullar-Strecker identifies the source of the massive profits. Of Meridian\u2019s $708 million energy margin for the half year, only $37m came from its retail arm. The other $671m came from wholesale \u2013 the generation side. Splitting up the gentailers, as NZ First has pledged to do, might help around the edges. \u201cBut it would not directly impact the ability of the generation arms of big four power firms to earn excessive profits by charging the fossil-fuel price for electricity they are able to generate for next-to-nothing from free water and the hydro dams they inherited from the Crown.\u201d<\/p>\n The economic costs<\/p>\n Government-commissioned modelling by Sense Partners, reported by\u00a0the NZ Herald\u2019s Kate MacNamara<\/a>\u00a0in December, found high electricity prices had cost New Zealand more than $5.2 billion in foregone GDP over the near-decade to 2025, leaving wages 1.4% lower and employment 0.5% lower than they otherwise would have been. \u201cThe estimated GDP loss is driven largely by lost household spending, 1.65% lower in 2025 than it would otherwise have been.\u201d<\/p>\n