More risk than reward in power shake-up:TrustPower
More risk than reward for consumers in Brownlee electricity reforms, says TrustPower
by Pattrick Smellie
Listed electricity generator and retailer TrustPower Ltd is the only major player in the sector willing to express a detailed view on today's announcement by Energy Minister Gerry Brownlee of sweeping electricity market reforms, saying government interventions have consistently failed to produce a more competitive market.
"There's more risk in
it for the consumer than reward, we'd have thought," said
TrustPower spokesman Graeme Purches. "There are bits of it
that we think are quite good and support, and there are
other bits that aren't."
Other industry players were
more circumspect, with neither NZX-listed Contact Energy nor
state-owned MightyRiverPower willing to comment before
studying the decisions.
However, the two state-owned
generators most affected by the moves, Meridian and Genesis
Energy, had clearly different stances, reflecting the fact
the Meridian loses its Tekapo A and B hydro power stations
to Genesis and picks up the diesel-fired reserve energy
plant currently in place at Whirinaki.
Genesis welcomed
the decisions and said it "supports all measures designed to
improve competition in the electricity marketplace", while
Meridian's CEO Tim Lusk noted that “at the end of the day
the Government is our owner and it is our role to work with
the decisions it makes". "That is what we will do. As it
always does, Meridian will look for the opportunities which
may arise from the new arrangements."
NZX-listed
TrustPower was concerned that the physical asset swaps
announced today were unnecessary, said Purches. This could
have been achieved by a larger requirement for the SOEs to
write larger long term "virtual asset swap" contracts than
are already envisaged under the Brownlee package of
reforms.
Meridian is required to sell 1000 Gigawatt
hours of electricity a year of "South Island energy" to MRP
and buy back from it 1000 GWh of "North Island energy", and
to arrange the same back-to-back swap with Genesis, but for
a total of 450GWh a year.
"What the reforms seem to
be doing is setting the SOE's up to succeed in enabling them
to compete in both islands," said Purches. "Whether that's
good for consumers, only time will tell."
TrustPower
enjoys the highest average retail margins in the electricity
sector, along with strong customer loyalty, including high
value pockets of customers throughout the South Island,
where increased competition is already occurring following
MRP's aggressive entry into South Island residential
retailing last year. By giving the Tekapo stations to
Genesis, the government now expects Genesis to launch into
the South Island residential market.
Purches
suggested also that Meridian was likely to move the
Whirinaki station to Christchurch, where the company had
first lobbied to have it installed when Labour Energy
Minister Pete Hodgson required its construction after the
2003 winter power scare.
The uncertainty created by
the industry shake-up was likely to have a chilling effect
on private electricity generators' willingness to invest in
new electricity plant, raising the prospect of shortages
again within a decade, said Purches.
In select
committee hearings earlier today, Finance Minister Bill
English confirmed that all SOEs are now being required to
make commercial decisions rather than engage in the
"relationship management model" - a direct reference to
Meridian's closeness to the previous Labour
administration.
(BusinessWire) 17:42:30