Source: Radio New Zealand
Meridian Energy CEO Mike Roan. Meridian Energy
Meridian Energy says households could face power bill increases of up to seven percent this year, mostly due to lines and transmission charges.
The country’s biggest power generator returned to profitability in the half-year ended December, posting a bottom-line profit of $227 million, compared to the previous year’s dry-year-driven loss of $121m.
Chief executive Mike Roan said “unfortunately” some cost increases would be passed through to households again this year.
“I had assumed they might be in the order of around 5 percent earlier as we came back from Christmas,” he said.
“But the lines and transmission component has come in higher than expected, so my 5 percent has lifted to more like 7 [percent].”
Lines and transmission cost increases are regulated by the Commerce Commission, and they have been increasing to fund infrastructure improvements.
“The energy component of those increases is just above the rate of inflation, so we are doing a good job of limiting the increases in price driven by electricity costs, but that lines and transmission component is challenging, and it will flow for the next few years through consumers’ bills.”
Roan acknowledged it was “really tough” for customers to hear.
Asked whether companies the size of Meridian could cushion the impact on households, Roan said it did cushion households when it came to energy prices.
“That was evident materially last year given our result where we did buy a whole lot of insurance to protect the electricity system, but we try to pass through those line charges to consumers,” he said.
Meridian has remained competitive in the household market, with the company recording a 12 percent increase in retail sales volumes from a year ago.
LNG will help dry-year risk but no ‘silver bullet’
Mike Roan said the government’s move to import liquefied natural gas (LNG) would help the energy system during dry years.
“The combination of the Huntly strategic reserve, the big demand response agreement we’ve got with the Tiwai aluminium smelter down south, and LNG, will help us navigate future droughts successfully as a country,” he said.
“There’s no question about that.”
Roan said early indications showed forward pricing had also moved lower following the government’s LNG announcement and various power companies’ results.
“Interestingly – and there aren’t many coincidences in financial markets – is those forward prices have come off over the last couple of weeks and since that announcement,” he said.
“I don’t think it’s a coincidence that those prices have started to think about the amount of investment that’s coming to market because we’ve just been through the interim announcements by ourselves and our competitors.”
Roan said forward prices had fallen by around $10 a megawatt hour.
Along with the country’s other major generators, Meridian has extensive projects underway to build new electricity generation.
Meridian said it continued to move at pace towards its goal of having seven generation projects in construction ready by 2030.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
