Suggestion Genesis could hold Meridian Energy to ransom

People used to dealing with the hydro generation issues of the Waitaki River are struggling to see how two competing power companies can work together to use the same resource wisely.

The river's eight power stations are operated by Meridian Energy at present, but the Government proposes two of them - Tekapo A and B - be handed to Genesis Energy in a bid to create more competition.

Waitaki Valley observers spoken to by the Otago Daily Times are sceptical about the practicalities of splitting the river's hydro system between the two; some suggesting Genesis could hold Meridian to ransom.

Energy Minister Gerry Brownlee's Electricity Industry Bill caught some by surprise, with the North Island-based Genesis getting first use of the water flowing from the Southern Alps into the Waitaki River system.

Meridian spokesman Alan Seay told the ODT: "It's not a scenario that Meridian or, I suspect, Genesis ever contemplated."

He said submissions to the Government had focused on swapping Meridian's Manapouri power station for the Genesis EP3 gas generator at Huntly.

". . . the scenario of a swap involving the two Tekapo stations was not something that we had contemplated."

A background paper released yesterday by the Electricity Technical Advisory Group, which considered submissions on changes to the electricity industry, shows Rio Tinto, which operates the Tiwai Pt aluminium smelter, opposed swapping Manapouri and noted that under its electricity supply contract the swap would need its agreement.

The advisory group favoured the Tekapo swap because it would reduce Meridian's dominant position in relation to hydro storage and improve retail competition.

"There may be some risk of technical efficiency losses at times, but in general Lake Pukaki (with 40% of New Zealand's hydro storage) decouples day-to-day operation of the Tekapo system from the rest of the Waitaki system.

". . . on a day-to-day basis . . . the Tekapo stations can . . . be operated independently of the rest of the Waitaki scheme," the paper said.

Mr Seay said Meridian would not be expressing any view on the Bill "in the short term" and was working out the "practicalities" of the swap.

Waitaki First spokeswoman Helen Brookes, who fought Meridian over its Lower Waitaki Project Aqua scheme, said it was the company's strategy to maintain a generation monopoly on the river and she regarded the Government's decision as "quite surprising".

Dave Henshaw, spokesman for the Aoraki Water Trust, which lost its High Court battle with Meridian to get water from Lake Tekapo for its Mackenzie Basin irrigation scheme, said the change would not make much difference to the trust but "defied logic" and would not improve efficiency.

"How can you have two different companies controlling two parts of a highly interlocked chain of generators?"He considered the company controlling water at the top of the scheme [Genesis] "must be able to hold [Meridian] at the bottom to ransom".

The technical group's paper says Meridian would "undoubtedly" need to take account of Genesis' operations when framing its strategy "but may be able to use Lake Pukaki as a buffer".

- mark.price@odt.co.nz