Saturday, 24 August 2013

Trousering the regulatory dividend

Sometimes we get a clear reading on the intensity of competition, and Simon McKenzie pointed to one yesterday. He runs an electricity lines company which was forced by regulation to cut its prices, so he's understandably grumpy to see most of the benefit of the price cut resting in the accounts of electricity retailers. As the English would say, its been trousered.

Here are the details, using data from MBIE's quarterly survey of retail electricity prices in United Networks region for the 3 months to February and May 2013:*



Between these two periods the line charge dropped by 0.77cents/kwh. Meridian passed virtually all of it on to customers - perhaps seeking market share (it only has 6% here).

Second prize goes to Mercury which passed on about 1/3 of the price cut and pocketed the rest. Mercury has a 30% market share.

The other big players Genesis (31%) and Contact (23%) apparently saw no need to cut prices, and nor did the minnows Energy Online (6%), Powershop (4%), Nova (<1%), Trustpower (<1%).

This is not a good look for an industry that would have us believe it is competitive.

*The vertical axis is cents/kwh for a standard household.

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