Consumers fed up with power companies making billions as bills rise, market commentators say

Consumers are tired of power companies reporting billions of dollars in earnings as household bills rise, market commentators say.

But the companies themselves say they need the profits to invest in generation.

Mercury on Tuesday recorded a net profit after tax of $321 million for the most recent full year, as well as operating earnings of more than $1 billion.

Contact Energy reported a record net profit of $423 million last week, and operating earnings of $1.011 billion.

Meridian and Genesis will report their results next week.

Polling by Electric Kiwi and 2Degrees showed about 20 percent of people strongly supported structural separation of electricity gentailers, and about a third somewhat supported the idea. Less than 10 percent somewhat or strongly opposed it.

Separation refers to dividing off gentailers' power production from their retail business. Competitors have argued that the current market structure gives them an advantage over other retailers.

The Electricity Authority responded with new rules last month that require the gentailers to supply hedges on an even-handed basis to all buyers, so they cannot favour their own retail businesses on price or non-price terms.

Huia Burt, chief executive at Electric Kiwi, said the survey reflected that people did not think the energy market was functioning in their best interests.

"The cost-of-living crisis is continuing on and energy bills have played a big part in inflation. They've seen it with their own eyes, bills going up, and they want to see real change."

Power prices rose 12 percent on average last year and went up again about 8 percent in April this year.

She said customers would be upset to see large profits at the same time as their bills were increasing.

"I don't think you couldn't, to see the headlines about billion-dollar earnings when we have the high wholesale prices of the last few years flowing through to electricity bills and they are now 20 percent higher than they were."

She said gentailers would say increasing generation was part of the profit story.

"That's true but the vast majority of it is still being earned by high prices on fully depreciated assets. New build is part of the story but we can't ignore the fact that high prices are what benefit gentailer profits."

Burt said the Electricity Authority's moves were a step in the right direction but did not solve the problem that gentailers were incentivised to keep prices as high as possible to maximise profit.

"Our argument has always been you need separation because then you open up the market and you have retailers who are absolutely incentivised to drive down price as low as it can go. And you create that really competitive tension between the generation side and the retail side which is so important for consumers."

People are 'really annoyed'

Consumer NZ chief executive Jon Duffy said power was notable as the only sector where customer satisfaction was not increasing.

"In a modern, industrialised, first world economy people expect energy prices to be reasonable because electricity is the fuel that our entire economy runs on. If that's unaffordable, there's something fundamentally broken in the system."

He said Consumer wanted to see gentailers' dominance ended.

"It doesn't necessarily mean breaking them up, although that is an option, but it means putting measures in place so that new independent generation and retailers can enter the market and compete in a fair and level playing field."

He said power prices should also be required to reflect the real cost of generation and there should be more investment in homegrown energy.

There also needed to be an energy strategy, he said.

"I think the Government has twigged to the fact that people are also voters and they are annoyed. They're really annoyed. Recent surveying we did showed 55 percent of people said energy issues would affect how they vote. So if the current government isn't seen to be doing enough they could be punished in the polls for it. The problem we have is that it's a very confusing sector and it's very, very easy to put information out there that sounds great at a surface level but doesn't address the underlying problems."

A spokesperson for Contact Energy said it was investing heavily in the energy infrastructure New Zealand needed for secure, reliable and increasingly renewable electricity.

"Over the past five years, Contact has invested more than $2.4 billion in new renewable generation and energy infrastructure, including geothermal, solar and battery storage projects. We have a further pipeline of around 11TWh of renewable generation opportunities and recently completed the acquisition of Manawa Energy, a transaction worth more than $2 billion.

"These investments help increase supply, improve energy security and support lower emissions. Recent weeks have also seen wholesale electricity prices fall significantly, with ASX prices down around 30 per cent. Profit enables us to continue making these long-term investments in New Zealand's renewable energy transition."

ERGANZ chief executive Bridget Abernethy said New Zealand was seeing significant investment in new renewable generation, and today's generation significantly exceeded historic build rates.

"This level of investment can only occur with stable, enduring energy policy that gives investors long-term confidence in the market.

"Any proposed reforms to our electricity system should be judged against whether they improve affordability and reliability for consumers. None of the independent reviews of the electricity market in recent years have shown that separating the generator-retailers would deliver cheaper electricity prices or a more reliable system."