Support for breakup of gentailers

WELLINGTON: The former head of New Zealand’s largest power user has thrown his support behind a petition calling for a shakeup of the power industry, describing the current system as ‘‘governmentmandated extortion’’.

Kerry McDonald, a former managing director of Comalco, the business which owned the Tiwai Point aluminium smelter, was deputy chairman of the establishment board of national grid operator Transpower in the 1990s when the then National government was planning major reforms of the electricity sector.

The establishment board was meant to help the Government design the electricity system which would later result in the generators split up and, eventually, sold off.

However, Mr McDonald said many of the key recommendations, that the system be oriented to a reliable lowcost system to provide for the best interests of consumers went ‘‘completely out the door’’.

Instead, the system allowed companies that generated electricity to also operate as retailers, while providing no obligation for the electricity companies to collaborate, even when it was in the national interest.

‘‘The restructure was a complete disaster in almost every respect,’’ Mr McDonald said.

‘‘The fact that we haven’t built a new hydro station for 40 years is criminal.’’

Electricity prices have been a hot topic for much of this year, while wholesale prices typically more than double the longterm average.

However, Mr McDonald said the problems of this year had happened before and were predictable at the time of the reforms.

‘‘There’s nothing special about where we are now. It happens all the time. It’s just a little bit worse.’’

Mr McDonald emailed several contacts imploring them to support a petition by Flick Electric, an independent electricity retailer, which is calling for a breakup of the ‘‘gentailers’’, companies which both generate electricity and sell it to retail customers.

Alternatively, the petition calls for a marketplace in which all retailers are required to buy from the same market.

Mr McDonald said he was pleased to support the move, saying while other reforms were needed, structural separation was likely to lead to immediate improvements in the functioning of the electricity system.

Electric Kiwi made a similar suggestion when it wrote to Energy Minister Megan Woods complaining that the company had lost confidence in the wholesale electricity market.

Meridian, which generates more than a third of New Zealand’s electricity, mainly from large hydro stations in the lower South Island, said the calls for a breakup of the vertically integrated companies by independent retailers was ‘‘not supported by the evidence’’.

The Electricity Authority is conducting a ‘‘robust examination’’ of the wholesale electricity market, looking both at the function of the spot market and the market for electricity futures contracts.

The results are expected to be provided to the authority’s board in September. —