Commerce Commission enquires over hedging agreement between Meridian and Contact
Thursday, 29 April 2021
The country’s main competition watchdog appears to be taking an interest in the electricity market which is mainly managed by the Electricity Authority – an industry specific regulator.
A Commerce Commission spokesman said it was “aware of the hedging arrangements between Meridian and Contact Energy relating to Tiwai supply and are making enquiries”.
Meridian agreed a new power supply agreement with the Tiwai Point aluminium smelter in January under which it is believed to have agreed to supply 572 megawatts of power to the smelter at a discount price of about 3.5 cents per kilowatt-hour.
The commission’s enquiries do not amount to an investigation and the commission declined to elaborate, or say whether it was asking questions off its own back or in response to a complaint.
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A Meridian spokeswoman said it was not aware of any concerns.
Contact Energy deputy chief executive James Kilty said the commission had previously made enquires when new power supply deals had been struck with the smelter.
Meridian, which is the country’s largest generator, states on its website that it has financial contracts with other generators to protect it from higher wholesale market prices.
These include a long-standing “swaption” agreement with Genesis Energy which in effect helps it lean on coal and gas generation from Genesis when its own hydro generation is constrained by dry weather.
“We have similar financial contracts with other generators which together with a range of other financial instruments, help us achieve greater price certainty for our customers and more reliable returns for our investors,” Meridian states.
The commission said it also had three investigations underway in the electricity sector relating to billing and charging matters that relate to possible breaches of the Fair Trading Act, which the commission polices.
“These are ongoing, so we are not able to name the parties or make any other comment,” its spokesman said.