Electric Kiwi seeks disciplinary action against Meridian for price spike

Fledgling electricity retailer Electric Kiwi is seeking disciplinary action against the country's largest power generator, Meridian Energy [NZX:MEL], following price spikes in the wholesale electricity market on June 16 that saw prices as high as $4000 per Megawatt hour.

However, Flick Electric, a rival minnow retailer whose customers would have felt the main brunt of the price spike, is not taking any action and says it's "pretty comfortable" both with the way the wholesale electricity market worked that day and the tools it gives customers to manage such price spikes.

For its part, Meridian Energy is waiting to hear whether the electricity regulator will agree to conduct an "undesirable trading situation" inquiry. The EA says it is in the "very early stages of gathering and processing information" on the complaint.

Electric Kiwi director Phil Anderson told BusinessDesk it believed Meridian had deliberately manipulated wholesale electricity prices "in a way that suits it," while Meridian chief executive Mark Binns said the price spikes resulted from a "perfect storm" of circumstances on a day when temperatures plunged around the nation, leading to a sharp surge in electricity demand, on a still day in the North Island that prevented wind farms from generating much power.

That put pressure on South Island hydro generators to meet national electricity demand, which was hampered by the Cook Strait cable's ability to push enough electricity north and a shortage of so-called reserve capacity in the North Island, where some power companies have recently closed fast-starting and baseload gas-fired power plants.

Electric Kiwi's customers are charged for power on a flat rate basis, unlike Flick's, who are charged according to the prevailing wholesale electricity spot price. That leaves Flick customers exposed to spikes in power prices caused by unusual circumstances in the national electricity system.

Mr Anderson said it was mounting its UTS (undesirable trading situation) complaint to the electricity regulator because "we still think it's in the interests of customers in the long term to challenge Meridian's behaviour," despite minimal impact on its customers.

"We think they manipulated prices," he said. "There was a genuine shortage in the North Island but they caused an artificial shortage in the South Island."

Electric Kiwi ran a fully hedged position, so was not adversely affected on the day, while Flick's chief executive, Steve O'Connor, said there had been "very modest customer impact."

"We're delighted by the response of our customers," said Mr O'Connor, pointing to his company's ability to monitor spot prices and adjust electricity use accordingly.

With 3000 customers and the second-fastest growing retailer in May, Electric Kiwi is not only battling it out with the big electricity retailers but also with Flick, which has a little over 11,000 customers and was the fastest-growing retailer last month.

(BusinessDesk)