Government rejects power profiteering accusations

By Phil Boeyen, ShareChat Business News Editor

Friday 21st September 2001

The government has released information which it says clears the state-owned electricity generators from opposition claims of profiteering during the recent power crisis.

Minister for State Owned Enterprises, Mark Burton, says advice the government has received confirms that Mighty River Power, Genesis Power and Meridian Energy acted entirely appropriately during the winter power shortage.

"These papers confirm that there is no evidence that SOEs have acted irresponsibly.

"Meridian Energy and Mighty River Power have not benefited from high wholesale prices, as they have cut output to the bare minimum required to cover hedged contracts and retail commitments.

Mr Burton says although Genesis Power used its reserve thermal capacity to increase output and increased profits for a short period prior to August, Treasury and the Crown Company Monitoring Advisory Unit say it does not reflect profiteering.

"Rather it reflects the return Genesis should receive for maintaining the electricity market's reserve generation capacity.

"In the words of Treasury: "If we expect their capacity to be maintained as a safeguard, to ensure supply in periods of low hydro capacity, it is important that generators can benefit when prices are high."

Mr Burton claims the behaviour of the electricity SOEs has been entirely consistent with their responsibility to act commercially and as good corporate citizens.

Both Genesis and Meridian increased their retail customer base as a result of the winter power shortage, buying customers from Natural Gas (NZSE: NCH) as the listed energy company sought desperately to reduce its exposure to high wholesale prices.

For the year ended June NGC lost $301.6 million compared to last year's profit of $43.5 million. The figure included abnormal losses of $311.5 million from writing down the value of electricity retailing assets.

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