Small electricity company calls out big provider for 'misusing market power' to make profit

Kate Nicol-Williams
Source: 1News

The Electricity Authority has confirmed an undesirable trading situation (UTS) occurred last December during extreme rainfall in the South Island which saw lake levels above the maximum.

There was a surplus of supply, yet wholesale electricity prices did not come down and remained high for an extended period.

The electricity market watchdog said the actions of power companies Contact, Meridian and Genesis contributed to the situation, along with other factors which resulted in a lack of competition and excess spilling of water.

"Having considered all of the evidence, the Authority has decided the situation was such that confidence in the wholesale market was, or may have been, threatened," it said in a final decision paper released today.

The claim of an UTS was made on 12 December last year by Haast Energy Trading, Ecotricity, Electric Kiwi, Flick Electric, Oji Fibre, Pulse Energy Alliance and Vocus.

Flick Electric chief executive Steve O’Connor said in a statement the decision is good news for consumers.

"It is a relief to see the watchdog is on track to holding Meridian to account. They should have been generating electricity when water was plentiful.

"Instead we reckon they've been using their part-government owned assets to lift wholesale prices and maximise their profits," he claimed.

A draft paper on actions to correct the UTS event is expected to be released by the authority in February next year for consultation.

Separately, the Electricity Authority is investigating whether Contact and Meridian’s behaviour breached the High Standard of Trading Conduct after allegations were made in the 2019 claim.

O’Connor, of Flick Electric, said the watchdog needed to issue a “tough penalty” to Meridian.

"Meridian needs more than a slap on the wrist with a wet bus ticket … otherwise there’s no real disincentive to stop them misusing market power," he said in a statement.

The investigation is expected to be complete early next year.

"When we looked at the event in hindsight we realised that we did spill slightly more water than was necessary - even though we generated at record levels and most of the spill was completely unavoidable. We certainly have learned from this event," Meridian Energy told 1 NEWS.

"While we could have done better, we still don’t think this event met the test for an Undesirable Trading Situation.

"The EA has been clear the situation was a result of the collective impact of a number of factors, some that were in Meridian’s control, but others that were a feature of what was happening in the wider market and the truly exceptional weather conditions. It’s pleasing the EA has said it is not looking to establish blame on any party in this process."