Cap on power charges upheld

Genesis Energy chief executive Albert Brantley. Photo / Sarah Ivey

The High Court has upheld the electricity regulator's retrospective cap on wholesale charges following the "Big Saturday" price spike when Genesis Energy charged up to 200 times the going rate.

Losses suffered by power wholesalers, retailers and big business users were estimated at between $45 million to $50 million.

Judge Ronald Young said he was satisfied the Electricity Authority made no error of law in reaching its conclusion that an "undesirable trading situation" or UTS had occurred.

State-owned enterprise Genesis charged up to $20,000 per megawatt hour during a seven-hour period when supplies to northern New Zealand were crimped by Transpower maintenance on March 26 last year. In July, the authority ordered prices be reset no higher than $3000 per megawatt hour.

Genesis appealed that decision to the High Court with Bay of Plenty Energy/Todd Energy and Contact Energy.

At the time of the appeal Genesis said the company's decision was based on ensuring the wider market could have assurance about the nature and scope of the market rules in the future, given the "uncertainty" created by the authority's decision. Genesis also said the companies that had been caught out had the opportunity to arrange hedge cover before March 26.

In a ruling released yesterday, Judge Young said the appellants had claimed there had been too little focus on the definition of a UTS and it had been applied too broadly.

But the judge said the authority had been conscious it was interpreting the meaning of a UTS.

"I am satisfied that the authority's analysis of the meaning of a UTS was correct. The authority found that the vast majority of market participants did not foresee the high prices," Judge Young said.

Pulse Utilities had supported the authority's decision and said like other players it could not to react in time to the sudden wholesale price spike.

Chief executive Dene Biddlecombe said it was vital for the authority to continue to have the power to investigate and declare a UTS to retain confidence in the operation of the wholesale electricity market.

Powershop's chief executive Ari Sargent said it was a sensible outcome.

"We were also of a view that Genesis' behaviour was unacceptable and could damage the market."

Genesis said it was considering the judgment and talking to co-appellants before deciding on its next move.