Contact Energy Raises Gas Prices for 40,000 Homes by 17%

Contact Energy is set to increase gas prices for approximately 40,000 residential customers by an average of 17%, citing the need to balance current costs with the transition towards a renewable energy future. This price adjustment takes effect on December 1, 2023, and follows a period where residential gas charges have already exceeded the spot market price of gas by more than double.

The decision comes as Forsyth Barr, a financial analysis firm, projects that Contact Energy will see a 15% increase in net profit, reaching $388 million for the financial year ending in June. One customer in Wellington reported an increase of over 20% in both the fixed daily charge for gas and the variable gas charge.

New Pricing Details

Under the revised pricing structure, the cost for gas on Contact Energy’s “Living Smart” gas plan will rise to 14.9 cents per kilowatt hour, excluding GST and any prompt-payment discounts. This translates to approximately $41.40 per gigajoule of gas, also excluding GST.

In comparison, gas was trading at $13.92 per gigajoule on the spot market recently, according to data from Transpower-owned EMS Tradepoint. The average price during the quarter stands at $16.01 per gigajoule. In contrast, Methanex, New Zealand’s largest gas consumer, reportedly pays no more than $6 per gigajoule for its supply.

A survey conducted for BusinessNZ indicated considerable variability in gas prices among businesses, with some paying under $15 per gigajoule while others exceed $25 per gigajoule.

Company Response and Future Outlook

A spokesperson for Contact Energy emphasized that the spot market price does not present a comprehensive view of the costs involved in supplying gas to households. “It doesn’t include long-term costs or risks to supply, so it’s not a good way to compare household gas prices,” the spokesperson said. They noted that several factors influence the final price customers pay, including delivery costs, which can vary significantly by location.

Carolyn Luey, Contact Energy’s Chief Retail Officer, acknowledged the challenges faced by many customers due to rising household expenses. “We are balancing the need for energy security with a constrained gas supply as the country transitions to a renewable energy future,” she stated. Luey assured customers that the company strives to offer a competitive gas rate amid these challenges.

Looking ahead, Forsyth Barr forecasts that Contact Energy will continue to perform well, estimating an operating profit of $242 million for the three months ending September, up from $227 million in the same period last year. The firm anticipates that net profits will grow from $331 million in the previous year to $388 million in the upcoming financial year, with further increases projected for subsequent years.

As New Zealand navigates its energy transition, the implications of these price changes will be closely monitored by both consumers and industry analysts.