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Speaker 1: Bad news is if the looming price of everything going

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Speaker 1: up because of the Iran war isn't bad enough. Your

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Speaker 1: power bill is going up, and it's going up tomorrow

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Speaker 1: by a predicted five to ten percent. Paul Fuse is

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Speaker 1: the manager of Consumer New Zealand's power switching with us HI.

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Speaker 2: Paul good evening.

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Speaker 1: This is down to the line charges, isn't It.

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Speaker 2: Mostly linees charges? So the increase is split roughly sixty

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Speaker 2: percent for the lines increases and around forty percent for

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Speaker 2: the energy itself in terms of increases.

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Speaker 1: Oh okay, so fairbit is coming from the power companies

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Speaker 1: even though they blame the line's charges.

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Speaker 2: Correct, that's right. So it's last year it was a

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Speaker 2: larger lines increase, it's a more moderate increase this year,

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Speaker 2: and we'll continue to be increases the next four years

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Speaker 2: with this regulatory cycle.

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Speaker 1: You guys, don't any comparisons as to which power companies

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Speaker 1: are doing less of a hike and which are doing more.

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Speaker 2: Especially difficult to tell because it varies between the different

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Speaker 2: regions and the different plan types as well. And also

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Speaker 2: on top of that, some retailers have different strategies. So

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Speaker 2: although most retailers will put their prices up on one

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Speaker 2: ape well, because that's when the prices, the line's prices change,

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Speaker 2: So retailers are clever and they basically put their prices

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Speaker 2: in with that increase. But this year some have gone

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Speaker 2: a little bit early and someonere going a little bit later,

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Speaker 2: So it's difficult to tell because there is quite a

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Speaker 2: bit of variances as well. So for example, we looked

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Speaker 2: across our power switch database and we looked across New

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Speaker 2: Zealand a typical household for a typical type of plan,

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Speaker 2: that's what we call a controlled hot water plan, which

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Speaker 2: is fairly typical across the country, and we found that

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Speaker 2: the price increases range from four percent to its highest

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Speaker 2: twelve percent across the country for that same plan for

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Speaker 2: the same sort of household. So it really does vary

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Speaker 2: in terms of the increase, So some households will see

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Speaker 2: a lower increase and some will see higher depending on

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Speaker 2: a range of factors.

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Speaker 1: I mean, this goes some way to explaining why it's

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Speaker 1: so difficult for consumers to decide which power plan to

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Speaker 1: be on and which company to be with.

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Speaker 2: Right, Well, that's right, and that's why we run powers

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Speaker 2: which in an idea world, you shouldn't need a price

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Speaker 2: comparison site, you know, any price comparison sites for most things.

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Speaker 2: But yeah, because it is so confildent and so complex

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Speaker 2: and the maths is so hard, we we have to

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Speaker 2: run the service were running for twenty five years now

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Speaker 2: to try and help people, you know, make head and

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Speaker 2: tail of this.

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Speaker 1: Well, do you have a view on whether the gent

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Speaker 1: tailors should be broken up?

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Speaker 2: Yes, we do so Consuming New Zealand's always head of

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Speaker 2: view that we feel it needs to be greater separation

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Speaker 2: between the generation and retail parts. If you want the

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Speaker 2: retail market to function as it should be or wasn't

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Speaker 2: envisaged it would function. We're not seeing the competition in

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Speaker 2: that retail space that would help bring prices down. And

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Speaker 2: part of that is because you know, the generation and

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Speaker 2: retail are joined together, there's greater separation. We think there'd

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Speaker 2: be more more competitive pressure.

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Speaker 1: Explain to me why this should happen. What what is

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Speaker 1: the benefit in taking a gent tailor breaking it up

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Speaker 1: so the generation is on one side the retailers on

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Speaker 1: the other. How does that bring the prices down?

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Speaker 2: Because it increases competitive pressure. So you can understand if

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Speaker 2: you are a non generator and you're having to purchase

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Speaker 2: electricity from the very same people you're competing against. I mean,

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Speaker 2: you don't need to be a market expert or and

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Speaker 2: economists to see the inherent flaws in that. In terms

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Speaker 2: of competition, it's very hard for independent retailers to compete.

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Speaker 2: And if you look at the profits of the of

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Speaker 2: the gentailers, they're quite large. And then the competitive market,

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Speaker 2: when you see large profits, you expect to see a

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Speaker 2: rush of in people rushing into that market, and we

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Speaker 2: don't see that, and we're seeing these small independents ready

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Speaker 2: struggle to get a foothold even though they're offering quite

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Speaker 2: competitive rates. So if you look at Octopus Energy, it's

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Speaker 2: a massive retailer overseas, it's one of the largest retailers

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Speaker 2: in the UK and an Asian hour. It's really struggled

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Speaker 2: to get a foothold here because it just can't compete

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Speaker 2: with these large gen tailors.

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Speaker 1: Okay, So one of the problems, I mean, and probably

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Speaker 1: the biggest criticism of the gen tailors is what they're

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Speaker 1: doing is they are artificially keeping the price of power

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Speaker 1: by not building enough generation, and so they keep it

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Speaker 1: just on that kind of edge so they could keep

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Speaker 1: on making as much money as possible. Does breaking that up?

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Speaker 1: Does breaking up a gen tailor solve that problem?

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Speaker 2: No, it won't. You're right there that that's a market

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Speaker 2: structure problem in the way that we price elticity in

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Speaker 2: terms of the market, in terms of how dispatch, and

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Speaker 2: that that sort of incentivizes scarcity because at the moment,

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Speaker 2: the marginal generator that's the last generator in the stack

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Speaker 2: sets the price. So even though we've got a really

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Speaker 2: low cost renewable base of really quite old renewable power stations,

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Speaker 2: the price is predominantly set by expensive gas fired and

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Speaker 2: coal fired power station. Son sets it right, that's right.

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Speaker 2: So even though we're sort of eighteen nine percent renewable,

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Speaker 2: the gas power stations sitting the price eighty percent of

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Speaker 2: the time. So that's what's driving the price up. Is

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Speaker 2: we're not paying on the on the price of the

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Speaker 2: actual generation. We're paying on that marginal generator. And of course,

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Speaker 2: if if that git, that benefits the lower cost generators

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Speaker 2: because they're getting paid a higher price. So the incentivist

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Speaker 2: to always keep it at that point where they're get

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Speaker 2: that high price. So the market incentivizes that scarcity, which

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Speaker 2: drives the high profit. So if you want the price

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Speaker 2: to come down, you need to change that mechanism.

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Speaker 1: Yeah, quite. How you do that is another question? All right,

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Speaker 1: Paul I really appreciate it's porfuge consuming Zealand power Switch Manager.

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