Genesis price spike 'despicable' - retailer

Photo / Greg Bowker

The row between state-owned power companies over Genesis Energy's decision to charge rivals 200 times normal rates for several hours has escalated with the action labelled "despicable" and a threat to the market's viability.

Retailer Powershop yesterday joined the list of those that have complained to the Electricity Authority about Genesis' move during a planned maintenance on high-voltage lines feeding the upper North Island for six hours on Saturday.

Prices reached $19,750 a megawatt hour during that period, compared with normal prices of less than $100 a MWh.

Some in the industry have questioned why retailers did not take out hedges to cover them in Auckland but Powershop, Meridian Energy and Mighty River Power say they could be tens of millions of dollars out of pocket. They are fighting to have the charges reversed.

Powershop's chief executive, Ari Sargent, said his company had hedge contracts throughout the country but was exposed in the upper North Island on Saturday. It could cost about $1.7 million, which was a "big hit" for the small retailer which has expanded in Auckland over summer.

"To be honest there's a sense of shellshock. What other business could think it could charge 200 times the going rate and get away with it, it's ludicrous," he said. "It's both despicable and idiotic, I don't know what they hope to achieve from it."

A Genesis spokesman said he could not comment in detail now the authority was investigating the complaints.

"There is a formal investigation, we'll be co-operating with the authority and hopefully it won't take too long to sort this out."

The lines work by Transpower had been known months in advance, he said. The authority is investigating three claims of an "undesirable trading situation" and hopes to make a decision within three weeks.

Sargent said this was the first real test of the authority, set up last year.

"If they don't act in a way which mitigates this means it is 'game on' and this sort of thing will become a feature of the market in the future. That means greater volatility, higher wholesale costs and those costs will flow through to all consumers."

Meridian, which could take a $10 million to $15 million hit, says in its complaint small retailers and users on the spot market could face solvency issues if they were over-exposed.

Genesis had taken advantage of the transmission constraints.

"Other generators in this position have not acted in the same way."

Meridian said it and other market participants did not seek hedges as they were costly and could not mitigate all circumstances.

Mighty River Power says its balance sheet could take a $25 million hit if prices were "not corrected".

Energy analyst Bryan Leyland said Genesis might have been within the rules but it "just exposes the fact that the market is a fraud".

Residential users are not immediately affected by spot prices but would feel the effect of such massive spikes over time.

"By jacking up the spot price hedge prices will follow."

TAKING A HIT

Genesis' sky-high spot prices could cost:
* Mighty River Power - $25m.
* Meridian - $15m.
* Powershop - $1.7m.