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Source: Reuters -
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Details from a Commerce Commission report shows New Zealanders have been overcharged an estimated $4.3 billion for power during a seven-year period from January 2001 to July 2007.
According to the report, the four big power generator-retailers - Meridian Energy, Genesis, Mighty River Power and Contact Energy - used their market dominance to overcharge.
"This (investigation) suggests that wholesale prices were, on
average, 18% higher than they would have been if the wholesale
market had been more competitive," the commission said.
This was especially so during the winter power crises when hydro
lake levels were low.
In the dry years of 2001 and 2003, the commission estimates companies earned an extra $1.5 billion for each year when the use of market power was in full force.
However, the commission says it is hard to estimate how much of the spike in wholesale prices were passed on to consumers at a retail level.
The investigation was opened in 2005 in response to complaints about high electricity prices, large company profits and a perception that there was little competitive activity between the generators.
Professor Frank Wolak, who analysed the wholesale market as part of the investigation, says the four big companies likely held "substantial market power on a recurring basis".
But despite the findings, the commission says there is no evidence that the companies breached the Commerce Act, saying that the companies used their power in a legitimate way.
"This behaviour does not meet the criteria of 'taking advantage' of market power," the commission said.
However, the commission will issue a warning to Trustpower which is at risk of breaching a section of the Act related to colluding to lessen competition.
A review of the electricity industry is currently in progress, having been been instigated by Energy Minister Gerry Brownlee in February on concerns over the security of supply.
Three companies - Meridian Energy, Mighty River Power and Genesis - are state owned enterprises.
Meridian Energy is the largest state-owned electricity generator-retailer and accounts for 70% of hydro lake storage.
