Double blow for power regulator

State-owned Transpower and Meridian Energy yesterday accused the Electricity Commission of putting a brake on profits and inhibiting industry development.

Meridian, tabling its annual report in Parliament yesterday, said the regulator had failed to secure the full confidence of the electricity industry.

Chief executive Keith Turner said some commission decisions were based on a narrow view of its policy and rules. But a revised Government directive to the Electricity Commission and the Commerce Commission emphasising the importance of a secure power supply and the need to encourage infrastructure investment could reverse some of that.

"In light of the revised statement, Meridian now looks forward to a new era of decision-making by the industry regulator," Turner said.

Turner repeated arguments against the Electricity Commission's ruling that South Island generators should cover the cost of upgrading the Cook Strait cable. He said the cost should be shared across the industry because power flowed south as well as north.

Meridian's report also disclosed a surge in net profit from $218.22 million to $856.8 million, reflecting a $652.5 million gain on last year's sale of its Southern Hydro business in Australia for $1.5 billion. After the sale Meridian paid a special dividend of $800 million to the Government.

Transpower, also tabling its report, said profits had fallen from $141.5 million to $96.9 million despite the time and resources spent on regulatory issues with the electricity and commerce commissions.

Last year the Commerce Commission blocked the national grid operator's plan to increase its prices and warned it would take control of its prices. The Electricity Commission blocked Transpower's plans to build a new 400kV line through the Waikato to Auckland.

Electricity Commission chairman Roy Hemmingway is the most high-profile casualty of these disputes and was not reappointed when his contract expired last month.

Transpower's profit decline was exaggerated by a one-off profit last year of $34.6 million, generated by a controversial cross-border lease of its network. Increased expenditure on it network also hurt.

It is not paying a dividend this year, instead retaining profits for investment.

Meanwhile, state-owned generator Genesis - also tabling its report - disclosed a rise in sales from $1.5 billion to $1.99 billion, thanks to a surge in power prices and a 17,000 increase in its retail customer numbers to 121,000.Net profit after tax rose from $70.25 million to $83.7 million.

The generator's fuel bill increased by almost a third to $280 million, reflecting the much higher demand for its coal- and gas-fired generation. The country now relies on Genesis' plants at Huntly to guarantee energy supply.

Thanks to last year's dry spring and late summer, for instance, and rapid draw-downs of South Island hydro reserves, the Huntly power station produced 6009 GWh, its highest-ever annual output. This is likely to increase next year when Genesis commissions a new gas turbine at Huntly.

Genesis energy chairman Brian Corban said: "The increased demand means our new 385MW Huntly combined-cycle gas turbine will provide welcome relief when it is fully commissioned in April 2007."

It will not pay a dividend to the Government this year and is instead holding profits to invest in the Huntly plant and its planned 240MW station at Rodney. The board is yet to decide its dividend policy for later years.