Talk:Meridian Energy

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I removed "At that point the New Zealand Electricity market became vertically integrated, and effectively New Zealand lost its competitive market." as it is incorrect.

At the time NGC sold the OnEnergy customers base it was also vertically integrated, having generation in both the North and the South Islands. Genesis and Meridian were both vertically integrated having customers in both islands. The effect of the sale was to concentrate retail in the hands of 5 major Generator/Retailers and remove one competitive retailer from the market. This certainly reduced the level of retail competition but it is incorrect to state that the competitive market was lost. Tiles 03:32, 22 May 2004 (UTC)

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I can't agree, but I think perhaps verically integrated may not be a particularly good way of describing it, since it hides the situation in a single, somewhat glib term.

That is why I removed it Tiles 01:19, 23 May 2004 (UTC)

OnEnerg/NGC did not have sufficient generation to satisfy its customers by a big margin. It purchased the majority of its retail load from the market. In about March 2001, its existing hedge contracts ended. Things were not looking too good for hydro supply coming into a dry winter. On Energy could not find any generators willing to sell hedge contracts for what they considered a reasonable price, so they made the decision to trade unhedged. Unfortunately for them, the dry winter eventuated and they bled dry, forcing a fire sale of their customer base to Genesis and Meridian.

So, the situation we have now is that the major companies (Meridian, Genesis, MRP and Contact) have a balance of generation and retail that means that at times of low market price (like right now) they can generate (or save their fuel and buy off the market) at low price. The generation arm of the business makes a wopping loss, but retail makes a tidy profit, so overall the business is ok. Conversely for market periods of high price.

Thus the maket is vertically integrated because the big 4 companies owns the supply chain. This has a very negative effect on competion because it acts as a barrier to entry of a purely retail (or generator) company, who must rely on competitors to offer hedges to mitigate market price risk. It also means that each company now has more or less optimum balance of max generation capacity and retail load. The companies do not want to compete for customers. It is not in their interests.

Thus, the original intentions of Max Bradford's dream of a contestable free-market electricity market in NZ are all but dead.

(The level of vertical integration can be attributed to Bradford's decision to split the line and energy functions of the power companies into separate entities. Tiles)

This reason (amongst others, like security of supply) was the spur for the Government to form the Electricity Commission.

These are not just my views. They are pretty widely held in the NZ electicity industry. Perha[ps I should go out and find research and documetation to back up my claims.

Sendervictorius 10:57, 22 May 2004 (UTC)

The Electricity Commission has commissioned a study of the state of competition in the NZ electricity market, which should be published in the next few months, see the RFP on "Wholesale and Retail Entry Barriers" at Electricity Commission RFPs. Your research could contribute to the final analysis when submissions are requested on the consultants' findings. The RFP identifies a number of possible reasons why competition may not be as robust as it could be. Vertical integration is only one possible reason and may not be the main reason. There is competition but it is limited and tends to be concentrated regionally. Today I can switch from Contact to Genesis and save money in Wellington. Six years ago I had no choice. My only concern with your original statement was that it was POV and not accurate.

What about "At that point the New Zealand Electricity market became further vertically integrated, and competition in the retail electricity market was adversely affected" ? Tiles 01:19, 23 May 2004 (UTC)

I take your point. There is perhaps still an element of POV in there.

To nit-pick: I agree my original comments were POV, but at some point someone's POV becomes "accepted history" (the POV of the victor!?). There are stages of development of POV. When does POV become generally accepted? I suppose even EC POV may not necessarily reflect generally held views. Consumer rights groups (e.g The NZ Consumers Institute) have views now that (in my view) reflect widely held public sentiments. I guess the point is that in writing wikipedia, and trying to stay objective, one must be wary of reporting any POV as fact - even if the EC chooses to act on vertical integration issues (which I don't believe it will).

What about "At that point the New Zealand Electricity market became further vertically integrated, and many believed competition in the retail electricity market was adversely affected"

Done. Tiles 07:35, 24 May 2004 (UTC)

As for proposing to the RPF, I am prevented by a conflict of interest. Mind you, I can't see how any responder with the skill-set and knowledge outlined in the RFP would't have conflicts of interest. I await the outcome eagerly. Sendervictorius 09:44, 23 May 2004 (UTC)

Let's hope you are not disappointed Tiles 07:35, 24 May 2004 (UTC)

[edit] Cost of Project Aqua

Where did the US$45million come from? The figure widely put about in the New Zealand press at the time, and in Meridian press releases was NZ$45 million. In fact, Meridian has spent around NZ$100million on the project, although it used some $55million of this buying land. Surprisingly, Meridian now finds itself being the largest dairy farm owner in New Zealand. Since this land is a capital asset, it is not a cost of the failed project.

Sendervictorius 10:05, 9 Jul 2004 (UTC)

At the time of the announcement, the reported spend was approximately NZ$90 million, which at the time was approximately US$45 million. If the actual amount spent is NZ$100 million then at current exchange rates that would be approximatley US$60 million. Perhaps it is better to stick with NZ dollars. At the time it was a question of changing the number or the currency. I chose to change the currency. On reflection, the wrong decision. I will update the article to reflect the new total expenditure. Tiles 03:50, 10 Jul 2004 (UTC)

Thanks for that. I guess we will know the exact figure when the annual report is published. Sendervictorius 10:45, 11 Jul 2004 (UTC)

[edit] Cost of Project Aqua Update

Annual Report just out."Project Aqua write-off listed as NZ$ 38,660,000. No mention of land purchased for the scheme, but at the end of the accounting period (30 June 2004) freehold land asset value (excluding generation structures and lant) was NZ$ 39,908,000 as against NZ$ 8,015,000 the previous year.

Sendervictorius 09:27, 9 Nov 2004 (UTC)