Power glut no help to customers

ALAN WOOD
Last updated 05:00 07/06/2014

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Energy generation prices could fall in the foreseeable future but it is less likely consumers will see a reduction in power bills, Meridian Energy chief executive Mark Binns says.

The generation company has South Island hydro operations in the Waitaki catchment and at Lake Manapouri, and listed last year as part of the Government's move to sell down state-owned assets.

In early March, Meridian announced there would be no changes to existing retail energy prices in the period to June 2015, with a generation oversupply in the market.

Binns said national demand had been relatively flat since 2006.

While generation costs might reduce, network providers including Transpower had to replace old infrastructure, and those costs would be passed on.

"You can see [retail prices easing] in terms of the energy component, but you've got to remember, when you get a bill, probably 35 to 40 per cent of it is in the distribution, it's in the lines companies," Binns said.

"But it is a competitive market in the energy part, and you could potentially see prices going down, they're under pressure now."

While 90 per cent of Meridian's generation came from hydro, any new generation assets would likely be windfarm-based, Binns said. The company was finishing two wind-based developments in Mill Creek near the Ohariu Valley, Wellington, and in Australia.

Hydro was "almost getting too hard" in New Zealand.

There were also risks in Australia, including a review of subsidies in the renewables energy sector by the Tony Abbott-led Government, Binns said.

The other key risk was the future of Meridian's biggest commercial customer, the Tiwai Point aluminium smelter.

Last year, the Government provided Tiwai Pt aluminium smelter $30 million in exchange for a promise to stay open until 2017.

Binns keeps a close eye on the spot aluminium price and talks regularly with the owners. "The first time they have the option to give us a notice to terminate is July 1 next year, which would see them out by January 1, 2017."

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