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

Contact Energy has announced a significant increase in gas prices for approximately 40,000 residential customers, raising rates by an average of 17%. This adjustment will take effect on December 1, 2024, amid ongoing transitions towards a more sustainable energy future in New Zealand. The company indicated this increase is necessary as it balances operational costs while responding to the evolving energy landscape.

The new pricing structure will see the charge for gas under Contact’s “Living Smart” plan rise to 14.9 cents per kilowatt hour, excluding Goods and Services Tax (GST) and any prompt-payment discounts. This translates to approximately $41.40 per gigajoule (GJ) of gas, significantly above the current spot market price, which stood at $13.92 per GJ as of last Friday, according to data from Transpower-owned EMS Tradepoint.

Despite the steep increase, Contact Energy’s residential gas charges are already more than double the spot market price. Financial forecasts from analyst firm Forsyth Barr suggest that Contact Energy is poised for a 15% increase in net profit, projecting earnings of $388 million in the year ending June 2025. This follows an estimated operating profit of $242 million in the three months leading to September 2024, up from $227 million in the previous year.

The discrepancies between residential pricing and the rates paid by large industrial consumers are notable. The largest gas user in the country, Methanex, reportedly pays no more than $6 per GJ for gas, while other businesses vary widely in their gas costs—some paying under $15 per GJ and others exceeding $25 per GJ. A spokesperson for Contact Energy explained, “The spot market price of gas doesn’t provide a full picture. It doesn’t include long-term costs or risks to supply, making it a poor comparison for household gas prices.”

Contact Energy’s Chief Retail Officer, Carolyn Luey, acknowledged the financial strain many New Zealand households are experiencing. “We know things are tough for many New Zealanders as household costs continue to rise,” she stated. Luey emphasized the company’s commitment to ensuring customers receive a competitive gas rate while balancing the need for energy security with the realities of a constrained gas supply during the transition towards renewable energy sources.

This price increase has sparked concern among consumers, especially as household expenses continue to escalate across the nation. As Contact Energy navigates the challenges of a changing energy market, its customers will need to adapt to these new gas rates while considering their overall energy consumption and costs.

As Contact Energy moves forward, it is poised to further increase its dividend payouts to shareholders in line with rising profits. Looking ahead, Forsyth Barr anticipates that net profits could climb to $475 million by June 2027 and $509 million the year after, indicating a strong financial trajectory despite the current challenges faced by residential customers.