Slow down with that electricity shake-up, Gerry – the hacks at The Press need time to catch up

A scribbler by name of Paul Gorman seems to be a bit slow on the uptake when it comes to electricity matters.

He is gushing to his Press readers today about the Government’s review of the electricity sector 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.

The threat to Meridian’s green reputation was obvious – of course – to anyone who was paying attention about a fortnight ago.

That’s when Brownlee’s proposed shake-up of the electricity sector was announced.

As Scoop reported –

Dec. 9 (BusinessWire) – Energy Minister Gerry Brownlie has adopted almost every major recommendation for electricity reform and gone further.

At a briefing in Wellington today, Brownlee outlined the government’s response to the Electricity Technical Advisory Group report.

Among major changes: Meridian Energy cedes the Tekapo A and B hydro stations to Genesis Energy and gains the Whirinaki diesel fired station; ‘virtual assets swaps’ for North and South Island power between Genesis, Meridian and Mighty River Power to shake up retail competition; and a compulsory hedge market.

Brownlee didn’t muck around. The same day he introduced the Electricity Industry Bill to Parliament to give effect to the changes, which should be enacted by October 2010.

In light of these grand plans, none of them a state secret, Alf was not surprised to learn (from Gorman’s belated catch-up) that –

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

“It has been overstated,” he told The Press.

If he had thought otherwise – obviously – he would not be proceeding with the electricity industry shake-up or the legislation that will give effect to it.

The point of the stuff in the Press today accordingly becomes a tad hard to grasp, although it does seem that Meridian is doing a lot of bleating behind the scenes.

A letter on its behalf has been sent 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.

Alf wonders when the letter was sent, because –

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.

Then we encounter one of those creatures who are grist to the mill of newspaper hacks – the anonymous source.

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.

But why might the asset be run down?

The answer, according to The Press, is that…

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.”

Bollocks. Meridian’s bosses can try to stick to renewable energy, but ultimately the buggers will do what the Government requires them to do, because their company is a state-owned enterrprise.

Of more interest to Alf is the opinion of the Institution of Professional Engineers New Zealand (Ipenz), which …

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.”

Alf is prepared to think about that sort of thing. But he won’t get too excited about Meridian’s image. If that company isn’t lumbered with an environmentally unfriendly station like Whirinaki, then some other state agency surely will be.

2 Responses to Slow down with that electricity shake-up, Gerry – the hacks at The Press need time to catch up

  1. Allen says:

    Oh, the electricity sector. I am still bemused why a country of 4 million needs something like 11 electricity generating companies. The so called competition hasn’t eventuated and prices increase. No surprise why…there are 11 reproductions of boards, management and administration. The head of the old Electricity Department was on less than $200,000 at year – nowdays that is about 2 months salary for most CEOs of the big generating companies! And I haven’t even started to include all the lines and electricity supply companies either! It is an employment scheme par excellence. Seems we have moved from the old railways as being an employment scheme to the electricity sector. Max Bradford has a lot to answer for…

  2. Pique Oil says:

    Allen says it all. 4 million people is not a lot to pay for all the cronies that are tucked onto boards of SOE’s. It is not a lot for all the believers in competition to get their employment contracts padded. It is a failed experiment. Max “cheaper Power Prices” Bradford assumed(I am being charitable here) that competition would occur. Perhaps He had been to a meeting with the oil cos and had believed the spin witches and warlocks?
    Competition requires an effective watchdog to ensure it works. The commerce commission is ineffective and competition does not occur in any sector that has the resources to out lawyer ComCom.

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