The Electricity Authority (EA) has released its preliminary findings on the complaint that Meridian spilt more water from its dams than it needed to, to make excess profits.
And while it is only a draft decision and feedback is still to come, here at Flick we think it’s a pretty ace step in the right direction to ensuring that excess profits don’t get in the way of fair power prices.
This preliminary decision comes out of the Undesirable Trading Situation (UTS) Claim that was made by Haast Energy Trading in December 2019 and was supported by Ecotricity, Vocus, Electric Kiwi, Flick Electric, Oji Fibre, and Pulse Energy Alliance.
In its preliminary findings, the EA found there was significant unnecessary spilling by Meridian, resulting in New Zealanders paying too much for power at the end of last year. In fact, it says electricity purchasers costs were around $80m higher than they should’ve been.
The EA says that “overall the outcomes in the spot market did not match the EA’s expectations of a power system with abundant cheap fuel.” We think that last bit is particularly significant as, here in Aotearoa - and especially when the rain comes like it did in December - we’ve got plenty of that wonderful renewable energy source that is water.
Chief Flickster, Steve O’Connor, says the decision indicates Meridian’s spilling meant higher power prices for New Zealanders at home.
“We think this is just one example of the use of market power that is happening to the detriment of everyday New Zealanders who pay the cost through higher bills. It is a relief to see the watchdog is on track to holding Meridian to account.”
“We believe Meridian has been ignoring the social responsibility associated with managing public assets and maintaining a social license to operate. They should have been generating electricity when water was plentiful. Instead we reckon they’ve been using those assets to lift wholesale prices and maximise their profits.”
Steve hopes that if this draft decision is reflected in the final decision, it should mean gentailers are made to think twice about this sort of activity in the future.
“What’s critical now is that the watchdog imposes a significant penalty in its final findings to send a strong message to generators that they should not use market power or engage in this type of conduct,” Steve says.
From a bigger picture perspective, the draft findings highlight the electricity industry is fundamentally broken because it allows gentailers to manipulate the market in the first place.
“The Electricity Authority needs to focus on making sure long-term structural change takes place so that gentailers can’t increase wholesale prices use market power to stifle competition.”
A final decision is expected around September, and Flick will be making a submission to push for the best outcome for consumers.