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Meridian suffers low South Island prices

Friday 1 Feb 2013 4:13 p.m.

By Pattrick Smellie

Meridian Energy achieved barely half the average price for wholesale electricity as its Auckland-based competitor, Mighty River Power, the state-owned power company's update for the December quarter shows.

The average price per Megawatt hour per customer for Meridian over the three months was $31.21 per Megawatt hour, while MRP said in its quarterly update earlier this week it had outperformed the market and achieved an average price of $66.25 per MWh.

Both state-owned generator-retailers are slated for partial privatisation, possibly both this year.

The timing depends on the outcome of a Supreme Court hearing that wraps up in Wellington on Friday, in which the Maori Council is seeking to block the sales.

While both are large-scale hydro generators, Meridian's assets are in the South Island while MRP's are all on the Waikato River, fed by Lake Taupo.

During the period, South Island catchments were at times full to overflowing, while Taupo was never as full, suggesting some explanation for better prices from North Island hydro assets.

Meridian also suffered 20 days in the quarter when work on upgrading the high voltage direct current link across Cook Strait had caused "periods of high price separation between the North and South Islands".

Price separation is where the national wholesale market for electricity is broken in two by constraints on the link between the two islands. Completion of the $672 million Transpower upgrade been delayed twice. It is now expected to commission in late April.

Meridian's customer numbers at 284,673 were steady, and retail churn is dropping at around 18 per cent.

Meridian also confirmed it is considering the future of its AU$500 million investment in the Macarthur wind farm, a joint venture in Victoria.

The bond-like structure of the arrangement could make it profitable for Meridian to exit while interest rates are low. However, "no decision is imminent," the company said.

NZN

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