Claim action kept power prices higher

Manapouri Power Station, on the western arm of Lake Manapouri in Fiordland National Park, is the...
Manapouri Power Station, on the western arm of Lake Manapouri in Fiordland National Park. Photo: ODT files
A small energy trading firm has accused Meridian Energy of neglecting environmental obligations in a bid to keep wholesale electricity prices up, thereby reaping profits of more than $35 million.

Haast Energy Trading, an Auckland-based firm that analyses and buys in the electricity market, said Meridian did not attempt to operate its Manapouri power station at full capacity while water levels at Lakes Manapouri and Te Anau rose to levels above what is stipulated in the operating guidelines.

The guidelines, under the Manapouri-Te Anau Development Act 1963, are based on recommendations from the Guardians of Lakes Manapouri and Te Anau group.

They are essentially environmental protection guidelines, which also seek to "optimise the energy output of the Manapouri power station".

In a letter, Haast managing director Phillip Anderson said Meridian might not have followed its operating guidelines for managing the lakes’ water levels in late October last year.

"Effectively, it looks to us like they’ve decided to fail to meet their environmental obligations in order to increase their own commercial position," Mr Anderson said.

"The net impact of them not running at capacity was they managed to hold power prices higher in the lower South Island."

Haast’s modelling of Meridian’s generation business found the company reaped extra revenue of more than $35million because of the high prices.

Haast has sent its letter of complaint to Guardians of Lakes Manapouri and Te Anau chairman Darryl Sycamore as well as Environment Southland.

The letter has also been sent to three government ministers.

"They’re managing big river resources for New Zealand - they’re a Government-controlled company - and yet they’re spilling water, breaching environmental obligations and jacking up power prices," Mr Anderson said.

"We just don’t think that’s on."

When the lakes were in "flood condition" the power station should be generating as much as it could, he said.

"It’s easy for them to say ‘well there was a flood; we had to spill’. But the question’s not about whether they had to spill. That was obvious they did have to spill, it’s just that they weren’t operating their plant at capacity while they were doing that."

The Electricity Authority is considering a complaint it received in December last year from Haast and several other power retailers that Contact Energy and Meridian price-gouged by spilling water from their dams instead of using it to generate power.

In a statement, a Meridian spokesman said the company dealt with extreme rainfall during the period Haast had complained about.

"Lake inflows as a result of the rainfall received were the second-highest since records began in 1932.

"Meridian used its best endeavours to manage the weather events in real time based on our experience of managing similar but less extreme situations."

Haast’s complaints were made with the benefit of hindsight and were based on "extensive computer modelling", the Meridian spokesman said.

"Even so, the additional generation they suggest we might have produced amounts to a small fraction — less than 1.5% by our calculation — of the total amount of generation or water spill over the November-December period."

Meridian was aware of its obligations under the guidelines and took them very seriously, the spokesman said.

"We have already notified ministers, Environment Southland and the Guardians of Lake Manapouri of departures from the guidelines that arose due to December’s extraordinary events.

"We believe Meridian has at all times acted prudently, carefully and with due regard to our obligations to all stakeholders."


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