Power pricing squabble fires up

By RICHARD BRADDELL

WELLINGTON - Yet another detail overlooked in the restructuring of the electricity industry has resulted in Transpower launching legal proceedings against its fellow SOE, Meridian Energy.

Transpower is seeking to recover payments withheld by Meridian since April 1 for use of the high voltage direct current cable (HVDC) that links the North and South islands.

Charges withheld by Meridian, which took over the commercial operation of ECNZ's South Island generation assets on April 1, amount to about $25 million, Transpower's general manager of sales and marketing, Bill Heaps, said.

Meridian reported a $110 million net profit to June 30. Its accounts said there were no likely contingent gains or losses it was aware of.

However, Mr Heaps said the dispute, which centres on Transpower's refusal to deviate from a pricing methodology it says was established by the Government, had been under formal discussion to no avail for a year until last November as part of the break-up of ECNZ.

As the largest South Island power generator, Meridian was a big user of the cable.

Mr Heaps said Transpower's pricing methods had already been supported in a previous court ruling against Auckland lines company Vector.

"Essentially, Meridian wants to shift the cost of the HVDC link to other parties," he said.

Meridian's chief executive, Keith Turner, said the dispute was covered by heads of agreement and ongoing negotiations included a meeting set down for today.

"Our preference was certainly to resolve this matter directly with Transpower," Dr Turner said.

The unseemly dispute between SOEs was described by one industry leader as resulting from the Government's "annoying failure" to deal with the issue when Transpower was split from ECNZ and the subsequent splits of ECNZ into Contact, Meridian, Mighty River and Genesis.

"It was quite obviously going to come up and it should have been dealt with because it clearly has an effect on the asset values of all of the components."