Engineer slams hydro split plan

The man who built the Upper Waitaki hydro scheme has come out strongly against Government plans to split the project.

Max Smith has called Energy Minister Gerry Brownlee's plans to transfer ownership of the Tekapo A and B power stations "silly"and claims the project needs to remain in the hands of one operator.

Changes to the Electricity Industry Bill will be introduced to Parliament today with a key initiative to transfer ownership of both power stations to Genesis Energy.

Meridian Energy manages 18 stations on the Waitaiki.

However, Mr Smith who engineered and managed the Upper Waitaki power project said all the stations should be run by one operator.

He suggested that splitting them up would create division as one operator could be at the mercy of another.

"You could have Tekapo A and B being run by one company to suit themselves but the flow of water may not suit the other." Mr Smith said. "They've got to be run as one. It runs better when it's co-ordinated by one person."

A ministerial review in April found that consumers were paying prices higher than justified by the cost of new generation, with residential customers particularly hard hit.

There was also a widespread perception New Zealand had a fragile and vulnerable electricity supply system, and there were concerns about current governance arrangements.

Energy Minister Gerry Brownlee said the law changes to force state-owned electricity generators to exchange assets was a bid to improve competition in the sector.

Mr Brownlee defended his decision to split the Upper Waitaki hydro scheme.

"Several re-allocation options were considered. The proposed allocation of Tekapo A and B to Genesis is the option that is the easiest to implement with the lowest overall cost relative to the competition benefit achieved."

Mr Brownlee described the "virtual asset swaps" as an exchange of financial hedge contracts between parties. "They allow the receiving party to operate in the retail market in an area where they have no supporting generation as if they had their own generation plant."

Meridian Energy responded to the decision by suspending new renewable energy notes and announced it would study the recommendations to understand the implications.

New applications for the notes had ceased, and maturing notes would be unable to be rolled over. Existing notes would not be unaffected by the suspension.

Meridian chief executive Tim Lusk said it would look for opportunities which might arise from the new setup. "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."

Alpine Energy's acting corporate services manager Andrew Tombs said there had been no discussion about the Government's key initiatives. He would not say if Alpine would look at going into the power retail market under the electricity bill's key initiatives.

"We haven't even discussed it, as our priority is our network upgrade," he said.

- © Fairfax NZ News