Business

Hundreds of thousands of dollars in additional costs are hitting Kiwi companies as they seek to renew their fixed electricity contracts. Photo / Thomas Despeyroux, Unsplash

By Nicholas Pointon from RNZ

Businesses are being hit by massive increases in their electricity bills as dry weather and a shortage of natural gas wreak havoc on the electricity market.

Hundreds of thousands of dollars in additional costs are hitting companies as they seek to renew their fixed electricity contracts.

Christchurch-based Enztec employs 70 people to design and manufacture high-end medical instruments for the global orthopedic market.

It generally operates on a fixed electricity contract with its suppliers to avoid spot price volatility.

But its chief executive Iain McMillan said he had struggled to secure a new deal since his previous contract ended in February.

“We had a company ready to negotiate a contract with us and we are still actively working on it.

“But several of the big sourcing companies have basically said they don’t have the sourcing capacity, so they won’t even put an offer on the table.”

Enztec is now forced to pay cash prices, which are more than 50% higher than a year ago, according to energy consultancy firm Energy Link.

Indeed, the country had suffered from blackouts in several gas fields since December, dry weather to start the year and low levels of hydro-lake.

Enztec’s monthly electricity bill had roughly doubled, but it was unable to pass these costs on to its customers because the price of its products is fixed.

As a result, McMillan said Enztec would have to cut spending on research and development because it had no idea when the upward pressure on electricity prices might ease.

Enztec’s situation was not unique, with more and more companies claiming to be at the mercy of high wholesale electricity prices.

Massive increase in food costs

RNZ understands that the new electricity contract for supermarket operator Foodstuffs is 70% more expensive.

The company declined to comment on the details, but in a statement, its North Island chief executive, Chris Quin, said it saw a significant increase in its electricity bill.

“The combination of price increases affects our stores in all areas, large and small, and a lot of effort is being put into trying to find efficiencies in managing consumer prices.

“This is particularly difficult for our small stores with a number of cost impacts related to recent policy changes, compliance costs, talent shortages and supply chain costs,” he said. -he declares.

RNZ also spoke with the managing director of a large commodities firm, who declined to be named, who said he thought he was doing well when his new contract did not increase than 43%.

Another company with offices across the country, which declined to comment on the matter, said it was facing price hikes of several hundred thousand dollars a year.

Customers “will end up paying”

Employers and Manufacturers Association’s advocacy leader Alan McDonald said consumers will ultimately pay.

“[The high power prices are] is going to push its way into the prices of consumer goods and other goods, alongside things like supply chain pressures, wage pressures, the whole Covid backdrop at all. “

RNZ approached some of the power companies to comment on this story and only Meridian responded.

He said he recognizes the effect that high wholesale electricity prices have on large customers who renounce their contracts.

Meridian said it continues to offer fixed price contracts and will work with its customers to provide solutions that, where possible, protect them from price increases.

The Electricity Authority’s director general of market policy, Andy Doube, said he was investigating prices in the wholesale market to make sure they were competitive.

However, he said spot prices were inherently volatile.

“When we have dry years, like the one we are experiencing, coupled with the gas problems encountered from Pohukura, we expect the market to start pricing hardly and I think these are some of the prices that we see at the moment. “

– RNZ

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Source: www.nzherald.co.nz
This notice was published: 2021-06-22 20:37:08

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