Competition preferable to regulation

Stuff reports:

The Green Party is calling for an independent umpire to regulate buy-back prices set by power companies, after a major supplier slashed its rate for new customers generating solar or wind power.

Users of renewable energy – such as solar or wind – use the electricity to power their home or business, and can sell back any excess electricity to their supplier to be used on the national grid.

Contact Energy announced on Friday it was cutting its buy-back rate for new customers by over half, dropping from 17c to 8c.

Green Party energy spokesman Gareth Hughes said the move showed electricity companies had all the power in setting terms, contract length and buy-back rate for exporting surplus energy.

“It is high time New Zealand established an independent umpire to set fair and non-subsidised rates for surplus energy with greater contract certainty,” he said.

Contact Energy, like most companies, will sell for as high a price as they can get and buy for as low a price as they can get.

In situations with monopolies, regulation can be the most sensible option.

But surely the preferred policy here should be to increase competition so that more companies are competing to buy surplus electricity. Having the Government set the price, will mean fewer companies wanting to buy surplus electricity, which will force consumers with their own generating capacity to lose choice.