Lines firms may get right to sell power

Distribution and retail was separated in the past because of the risk of lines companies tilting the field in their favour. Photo / Supplied

Lines companies are eyeing selling electricity within their own areas now moves are under way to lift restrictions.

The ministerial review into improving electricity market performance recommends expanding opportunities for lines companies to retail electricity within their own area subject to conditions.

The recommendation is one of several to encourage greater competition to hold prices which have galloped away in the past decade.

State owned enterprise Meridian is under fire for its behaviour during dry years and faces the biggest shakeup, including swapping generating assets with Genesis, if recommendations are adopted.

Generators contacted said they would be making submissions to the Government rather than commenting, although they are likely to vigorously oppose any moves to allow lines companies to compete head on. There are fears the lines companies could cherry-pick the best customers and tilt the playing field in their favour.

The mandatory ownership and separation of lines businesses from generation and retailing were a key plank of the Bradford reforms of 1998 and although softened since have effectively kept lines companies from selling electricity.

The country's biggest lines business, Auckland-based Vector, said it would in the first instance consider selling a generator's power if it was satisfied it was playing in a transparent market.

Chief executive Simon Mackenzie said his company would have to be satisfied they were getting the same deals as other retailers.

"It would be fair to say that's something that we would obviously consider."

Although Vector had some small generation interests in Taranaki, any larger commitment had not been an option because it couldn't sell the power in its area.

"It would be something that would be considered but have we got advanced plans in that [generation] space? Well - no."

Vector shares closed steady at $2.08 yesterday. Local lines companies were in many cases community-owned with their profits distributed to consumers which could give them an advantage, Mackenzie said.

Distribution and retail was separated in the past because of the risk of lines companies tilting the field in their favour by being slow to repair faults for rivals' customers.

The panel recommends corporate separation and compliance with arm's-length rules between lines and energy businesses.

Retail businesses owned by a lines business would be prohibited from buying the customer base of an existing retailer.

Electricity Networks Association chief executive Alan Jenkins said he did not expect lines companies to be rushing back into retailing but the prospect of them coming back would increase competitive pressure.

POWER POINTS

Review recommendations:
* An asset swap between State-owned generators Meridian Energy and Genesis Energy.
* The Electricity Commission loses most of its functions.
* Power companies should bear responsibility for managing dry-year risks, not all consumers.
* The Government-owned Whirinaki power station reassigned to an SOE or sold.
* SOEs required to disclose their risk position and other relevant information, like listed companies.