Plans blot Meridian's green credentials

BY PAUL GORMAN

A Government review of the electricity sector is jeopardising the green reputation of one of its biggest money-spinners.

Giant state-owned South Island generator and retailer Meridian Energy's multimillion-dollar carbon-neutral generating status will be threatened if the recommendations of a review – requested by Energy and Resources Minister Gerry Brownlee – are adopted.

Brownlee's review proposes stripping two key power stations from Meridian's Waitaki River hydro scheme and giving them to North Island state-owned enterprise Genesis Energy.

Meridian would then be given the Government's emergency diesel-powered generator at Whirinaki in Hawke's Bay.

Meridian's generation is hydro or wind-powered, although it sells thermally generated electricity when lakes are low.

Brownlee appears indifferent to the impact Whirinaki could have on Meridian's reputation.

"It has been overstated," he told The Press.

Meridian has written about the review to its shareholding ministers, Finance Minister Bill English and State-owned Enterprises Minister Simon Power, and to Associate Infrastructure Minister Steven Joyce.

However, its letter has not been addressed to Brownlee.

The Press, which has made an Official Information Act request for the letter, understands it was Meridian's response to a request by English and Power to give a no-holds-barred view of the proposals.

Brownlee's relationship with Meridian already appeared strained before the letter.

He blasted Meridian subsidiary Powershop for calling his review "utterly illogical" and "poorly thought out", challenging Powershop to "come out from behind Meridian's skirts".

Meridian price rises were punishing Christchurch's electricity users, who should shop around, he said this month.

One industry member told The Press this week Brownlee needed to be careful not to "run down a key asset" in case a future National government wanted to sell a Meridian stake.

Meridian chief executive Tim Lusk had said it would not consider building gas-fired power stations.

"Our mission statement is to be a global reference company in renewable energy. It is pretty hard to see how we would move into gas, because it would not do a lot for our brand."

One option for Meridian, if it wants to retain its carbon-neutral generating reputation, is to sell the diesel generator or pass it on to its business unit, Energy for Industry.

Meridian spokesman Alan Seay said yesterday the company was "as committed as we ever have been" to its renewable strategy. "We think we've got options that might preserve our carbon-neutral status, Whirinaki notwithstanding."

Brownlee said Meridian had been selling thermal power in recent years, despite its carbon-neutral branding.

"They do say there is a certain value in that brand, but they would have to put a book value on it and pay a dividend on it.

"Their plan is based on being a carbon-neutral generator, but they are also a substantial retailer, so you can't separate the two."

The Institution of Professional Engineers New Zealand (Ipenz) has added its voice to those against the proposed power-station swap, saying it would most likely fail and result in unnecessary spilling of water from hydro lakes.

Ipenz chief executive Andrew Cleland said it was likely Genesis would manage the Tekapo A and B stations to meet its own commercial needs.

A proposed agreement between Meridian and Genesis in which both would need to know about each other's operating intentions would be "fraught with difficulty".

"Tekapo A and B provide enough electricity for 85,000 to 100,000 residential customers," Cleland said.

"However, there is a real risk that Meridian's natural reaction to the asset transfer would be to reduce the number of retail customers by an equivalent amount.

"In a dry winter and with the limited capacity of the Cook Strait link, they might not be able to assure their South Island customers they can supply electricity.

"If Meridian were to reduce their customer base, then the competition the Government is seeking will not be achieved.

"This asset transfer will result in a lose-lose outcome for the Government, electricity customers and the taxpayer."

- © Fairfax NZ News