The Blog

Pumped-up pricing: why we're calling out Meridian and Contact

When we started Flick Electric Co. back in 2014, we had a dream in mind: one of an Aotearoa that’s backed by a reliable electricity industry; where our most vulnerable communities can afford the cost of power, and our tamariki thrive in warm, dry, healthy homes.

But you know what, Flicksters? That’s not happening. Even after the Government’s Electricity Price Review (EPR) earlier this year, we’re still encountering high power prices, we’re still encountering a market that’s being manipulated by those with the power to do so, and we’re still encountering an Electricity Authority (EA) that’s slow to react and enforce change. Everyday Kiwis are copping the brunt of it, and that’s not fair.

So today, we - along with independent power retailers Ecotricity, Electric Kiwi, Pulse Energy and Vocus Group - have supported a complaint (also known as an Undesirable Trading Situation, or UTS) laid by Haast Energy Trading to the EA that calls out some recent misbehaviour by gentailers.

The complaint highlights a few dodgy goings-on of late, where it appears that some generators are controlling hydro storage in a way that results in wasted water, higher electricity prices and an unnecessary increase in carbon emissions. We believe it’s so serious that we’ve asked the EA to immediately intervene and regulate the bidding behaviour of big generators.

What exactly has been happening?

Well, it appears that since 10 November 2019, Meridian and Contact have been spilling excess water from their hydro stations at Manapouri (Meridian), Roxburgh and Clyde (Contact), despite the stations running at less than maximum capacity.

On top of that, they’ve pushed up their bidding prices to a rate that we usually only see when one of those plants isn’t generating. And that’s resulted in more thermal generation being required (because it’s cheaper than hydro at present!), which has pushed power prices up high and released an estimated 6,000 tonnes of avoidable carbon emissions. Our numbers gurus have worked out that a month of hydro spill (at 300MW) is equal to the annual CO2 emissions of 43,000 small cars. Not cool!

Is there lots of water available at the moment?

Yep, with all that rain down in the South Island’s catchment areas, there’s been an abundance of water and our lake levels are above average for this time of year. And while some hydro spill is inevitable during high amounts of rainfall, the current spill levels aren’t necessary, because Contact and Meridian aren’t running their hydro at maximum capacity.

How exactly does this benefit Meridian and Contact?

It’s all about the almighty dollar. The UTS Claim by Haast Energy Trading estimates that Contact and Meridian have earned excess revenue of at least $23 million and $38 million respectively in the month since 10 November 2019 - and this is ongoing. Woah.

What does this mean for Kiwis?

Lots of water in the hydro lakes usually means hydro generation can run at maximum capacity, and that helps drives down wholesale prices, which in turn keeps retail prices in check for Kiwi families. Instead, at this time, higher cost thermal generation is setting the wholesale price, and it’s highly likely this will be passed on to customers - in fact, Genesis, Mercury and Meridian recently contacted their customers to inform them of retail price increases and said the reason for the increase is due to an increase in wholesale prices.

What does Flick want to see happen?

It’s simple, really. We want fair and affordable wholesale power prices, and we want the EA to stand up and do its job, and regulate the market power of the gentailers.

As Chief Flickster, Steve, says, “Right now, we have the worst of both worlds - we have a captured market who need power to live good lives, and we have unconstrained generators with massive market power.”

We know that the EA is only proposing tinkering with the existing market rules rather than dealing with the bigger issues that are now so glaringly evident. But it’s crystal clear that the market requires much more than this - and it can only begin to function well when the EA grows a backbone (yip, we said it) and enforces changes that will make a difference to the lives of Kiwi electricity consumers.