Electricity price turmoil puts heat on TrustPower

Friday 27th July 2001

CAUGHT IN THE S-BEND: The electricity crisis may claim more victims

The crisis is not going to be fixed by the proposed changes

- TrustPower spokesman

By Nick Smith

TrustPower yesterday vowed to ride out the drought and denied speculation its 280,000 customers were for sale.

Analysts are predicting TrustPower will be the next casualty of the energy crisis after the Natural Gas Corporation's capitulation.

NGC subsidiary On Energy sold its 290,000 North Island customers to SOE Genesis Power as it quit the market, which is experiencing ever-increasing wholesale prices.

A couple of weeks ago On Energy sold 116,000 South Island consumers to state-owned generator Meridian Energy for the same reason - it had failed to take out hedging contracts and was losing millions of dollars a day.

NGC's dumping of the multimillion-dollar-losing electricity subsidiary immediately saw NGC's share price rise 6c to 98c.

A snap debate was called in Parliament yesterday over emergency legislation to solve the crisis, which is putting the heat on businesses throughout the country. The bill will give energy ministers stronger powers to take action against companies accused of overcharging customers.

TrustPower spokesman Graeme Purches poured scorn on the bill, saying "the crisis is not going to be fixed by the proposed changes."

"The previous minister of the government [Max Bradford] created this mess and it is not acceptable for the present minister [Peter Hodgson] to say I am going to fix it [with rushed and flawed legislation]," he said. "The government is making a lot of money out of this crisis."

Mr Hodgson, while playing a straight bat to calls for further reform, said the country could face a repeat of the 1992 power crisis if rain did not fill hydro lakes within a month.

In a worst-case scenario, the country would face a massive conservation effort with widespread use of diesel generators, he said.

Mr Bradford, while defending his electricity reforms, conceded the soaring prices suggested profiteering by some players in the market.

"There are some questions whether the rules in the electricity market are adequate to cover spikes like this," Mr Bradford said. "There is doubt in my mind whether that is happening. There is the presumption that some - maybe Genesis and/or Meridian - [are taking unfair advantage of low lake levels].

"The structure [of the industry] is OK but there may be some faults within the market rules for offers and bids into the marketplace."

He said that all offers and bids should be put on public record so that "anything unusual or unacceptable behaviour" can be clearly seen by all parties.

Today, Mr Hodgson meets with electricity industry and consumer representatives to discuss the crisis. He is urging prudence.

"Some of these options are costly so we need to carefully judge when to incur those costs. If we move too soon it will cost money needlessly. If we move too late it will increase the risk of a crisis."

Who's to blame?

Comments from our readers

No comments yet