Power company swap 'too costly'

Swapping control of Lake Manapouri from Meridian Energy to Genesis might have proved too costly for the Tiwai Point aluminium smelter, an industry expert said.

Major Electricity Users' Group executive director Ralph Matthes said it was likely the Government did not go ahead with the asset swap proposed in April because mining company Rio Tinto Alcan, which owns almost 80 per cent of New Zealand Aluminium Smelters, would have ended up with two contracts for electricity supply.

Genesis would have held the main supply contract, while Meridian would have retained contracts to supply Tiwai during "dry" periods at Manapouri, Mr Matthes said. Dealing with two electricity companies would have added to Rio Tinto's overheads, making the changeover too costly, he said.

The contract between Meridian and Rio Tinto, signed in 2007, is understood to be worth more than $5 billion over almost 20 years.

The power generated from the Lake Manapouri hydro station is used by NZAS, New Zealand's single-largest electricity consumer.

Rio Tinto media spokeswoman Diane Collier said it was still assessing the pros and cons for Tiwai contained in the Electricity Industry Bill, which was introduced to parliament last Thursday. "Any government initiatives aimed at improving competition and the security of electricity supply is good for all energy consumers and good for New Zealand."

The bill outlined a suite of changes to the national electricity system to improve competition and restrict price increases. It followed a ministerial review of the market, released in April, which found consumers were paying too much for power, with residential customers the hardest hit. It proposed an enforced swap of hydro assets between the country's two largest state-owned generators as a way of improving market competition.

But Energy and Resources Minister Gerry Brownlee instead opted to transfer Meridian's Tekapo A and B power stations, in its Waitaki River hydro scheme, to Genesis in exchange for the Government's emergency diesel-powered generator at Whirinaki, Hawke's Bay.

The bill also proposed allowing line companies back into the retail market, establishing a $15 million fund to encourage customers to switch retailers and requiring generators to compensate customers during a power crisis.

Mr Matthes said Rio would likely benefit from the proposed legislation as the price it paid was partly linked to wholesale prices and its output.

michael.forbes@stl.co.nz

- © Fairfax NZ News

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Darren   #1   08:54 am Dec 18 2009

I think the government should back off introducing any bill, i think if the people of New Zealand actually got up out of their chairs and looked at switching to another power retailer, then perhaps it would stimulate a price war, but if not body does this, how can it be expected to happen by it self?

Every time someone switches to another company, they notice they've lost 1000 customers, they have the option to lower their prices, send the telemarketers out to get customers back again, i have had these people knocking on the door my self and offering discounts, bonus money if you sign up with them on the spot etc.

cheers,

Darren

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