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Businesses warned not to mislead over ETS price impacts

Wednesday 30th June 2010

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The Commerce Commission is warning businesses they face potential court action under the Fair Trading Act if they misrepresent price rises as being caused by the emissions trading scheme or the increase in GST.

The ETS comes into force tomorrow with impacts on electricity and fuel costs. The scheme is the first step in the government's efforts to place a cost on greenhouse gas emissions to encourage efficient energy use and will add an estimated $5 a week to household electricity and fuel bills. GST is set to rise to 15% from 12.5% on October 1.

"Businesses are not required by law to give reasons when they raise prices," said the commission, in what it described as a pre-emptive statement, although two electricity companies – Contact Energy and Mercury Energy - have already cited the ETS as a partial reason for raising tariffs.

Prime Minister John Key warned power companies on Monday to take great care about misrepresenting the impact of the ETS. Contact says it will raise prices to reflect the ETS impact, but that it is raising prices by between 10% and 17% in Dunedin at present because of "costs of generating electricity, building new power stations, purchasing gas, and providing retail services".

Mercury's general manager James Munro conceded in a radio interview today that the exact impact of the ETS on power prices was impossible to calculate accurately, despite a statement last month that its tariffs would rise to reflect the ETS from July 1.

The commission says businesses risk breaching the Fair Trading Act if they explain price increases as being caused by the ETS or the increase in GST, where the price rise exceeds the extra ETS or GST component.

“The impact of the ETS on each electricity or petrol company will vary, and consumers are not best placed to understand the technicalities of this so must rely on the information provided by these businesses," the commission said.

"The commission can and will take enforcement action if an investigation finds evidence of breaches of the Fair Trading Act."

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