Electricity payments system fails to cope

By FIONA ROTHERHAM

Electricity companies nationwide have been wrongly charged an estimated $40 million.

The misallocation through the industry's monthly reconciliation system has no impact on consumers, but it is hurting incumbent retailers - the ones who have traditionally serviced a region's customers - who are being forced to carry the cost of power sold by their competitors.

Retail electricity trading is administered and reconciled by M-co, whether bought through the NZ Electricity Market or the Metering and Reconciliation Information Agreement.

Richard Rowley, chairman of the agreement's governance board, said it was the single biggest issue facing the industry since dealing with customer-switching delays.

Other market participants said it was bringing the whole industry into disrepute.

The board has ordered a review of the reconciliation area, and new rules are expected to be in place by October/November.

Mr Rowley said anecdotal evidence suggested the total sum involved could be as high as $40 million.

"Either because people are gaming the process and information is not being gathered accurately, or a mixture of incompetence and those things, there are substantial values being misallocated in that process."

TransAlta indicated at a recent electricity conference that it was out of pocket "millions of dollars."

It was reluctant to discuss the matter, other than to say it was investigating whether any rules had been broken.

Energy Minister Pete Hodgson has been informed about the problems and has yet to make a response.

Since April last year, each energy trader has to provide monthly information about their customer usage on the national network.

This information, which is often provided by in-house data administrators, is used to allocate payments for wholesale energy sold by the generators.

The amount used by new competitors at each exit point in the national grid is deducted, along with any transmission losses.

The net amount is then charged to the incumbent retailer, who can end up paying for power supplied to customers by a competitor.

At present the rules do not require meters to be read monthly, so the information can be based on customer profiling.

It did not matter so much previously when there was no other competitor in a network area, but incumbent retailers say the honesty-box system is not coping with increased competition and the number of customers who are switching retailers.

M-co spokesman Allan Dawson said the reconciliation system had been "remarkably resilient" for a number of years but the environment around it had changed and caused problems.

The cashflows of smaller companies have suffered.

Ken Street, chairman of King Country Electric, said one of the company's greatest concerns was "the effect of the state-owned enterprise energy traders who are able to abuse the system established to regulate the new trading environment."

The three SOE power companies established from the split of ECNZ last year - Meridian, Genesis and Mighty River Power - have been aggressive in chasing new customers.

Both King Country Electric and Bay of Plenty Electric have had to fund more than $500,000 of consumption for Mighty River Power, after false data was provided.

Mighty River has since paid back the money, plus interest, as required under the compliance rules.

It refused to pay any penalty interest as sought by the incumbent retailers.

Mr Street said that whether deliberate or not, the failure to provide the correct information was "tantamount to theft."

Mighty River spokesman John Foote said there was nothing fraudulent in either incident.

"One of the problems is no one is really clean. Some are cleaner than others.

"We are all in a bit of a glasshouse here."

Mr Foote advocated the distribution of any unallocated power each month between all players, rather than leaving the incumbent retailer to foot the bill.