Plan risks loss of energy generation

The Government is risking a $2 million a year loss of electricity generation from the Waitaki River as a consequence of the change of ownership it is proposing for two of the river's eight power stations.

The Electricity Industry Bill introduced to Parliament last week gives Meridian Energy's Tekapo A and B stations to Genesis Energy to break up Meridian's dominance of the Waitaki system.

However, Energy Minister Gerry Brownlee's Cabinet paper recommending the change notes "there is some risk of reduced efficiency in water use but it is relatively small".

Asked to be more specific, the Ministry of Economic Development told the Otago Daily Times yesterday the "contingent cost would equate to around $2 million a year, or $16 million in net present value terms".

The Cabinet paper suggests the extent of efficiency losses would be mitigated by a water management agreement between the two companies.

The agreement would be needed to ensure resource consent conditions, flood management requirements and obligations on Meridian to provide power to Rio Tinto's Tiwai Point aluminium smelter were met.

The paper considered negotiating an agreement between the companies would be "moderately complicated" and might require arbitration if the parties could not agree.

The agreement of Rio Tinto was also likely to be required as well as the Commerce Commission which would need to authorise areas of integration between the two companies as they operated the system.

If Genesis is given control of the two Tekapo stations, it will control the flow of Lake Tekapo at the head of the system.

Lake Tekapo flows into the much larger Lake Pukaki, which would continue to be controlled by Meridian and was considered by the paper to be big enough to absorb variable inflows from Lake Tekapo, "except in extreme or flood conditions".

The Cabinet paper also noted there was "a significant risk" that splitting consents between the two power companies would "trigger applications from other parties to reallocate water".

It suggested legislation might be required to "reduce the scope for re-litigation of the consents".

mark.price@odt.co.nz

Add a Comment