Meridian slashes fixed-price deals

By CHRIS DANIELS

Big electricity users are being told by state-owned power company Meridian Energy that they must accept all the risk of a dry winter if they want to remain customers.

Energy Minister Peter Hodgson has asked officials to investigate the matter, to see if it shows a lack of competition in the power market.

Meridian Energy has sent a letter to 60 of its biggest customers, most in its home base of Canterbury, telling them it will no longer supply electricity at a fixed price.

These businesses must now either buy electricity on the fluctuating spot market, or go to another power company.

It has prompted market speculation that Meridian is scared of another dry winter, so wants to start shedding some burdensome customers.

Spot market prices have been climbing in the past week, with one benchmark average up 30 per cent.

Peter Townsend, head of the Christchurch Chamber of Commerce, said Meridian clearly did not want to negotiate with these customers, some of whom had annual power bills of $250,000.

"Clearly this is a situation where the market is not working, because I don't know of any company that goes around deliberately getting rid of its key customers in the context of its day-to-day business," he said.

Meridian spokesman Alan Seay said a range of factors were taken into account when deciding who should be told to go onto the spot market, including price and contract length. All were on "time of use meters", which charge different rates at different times of the day.

"They've had very low prices for four or five years and the landscape has changed since last winter."

Mr Seay said 60 customers had received the letters, with a further "10 or 15" due to get them in the next few months.

Rival power companies believe Meridian's actions demonstrate it has too many customers compared with its capacity to generate electricity, so is trying to force them to either go elsewhere or take on the full risk of another dry winter forcing up prices.

Contact Energy sent sales agents to Christchurch as soon as it heard of the Meridian letters. It is offering fixed-price contracts to big customers wanting to leave Meridian.

"We're in there boots and all, looking for those customers," said Contact spokesman Pattrick Smellie. "They are good, strong customers and we've signed substantial customers in Christchurch in the past few days and expect to sign more in the next few."

Rival state-owned enterprise Mighty River Power is not forcing any of its customers onto the spot market. When contracts come up for renewal, big customers are offered a fixed price for all energy, a mixed deal with some electricity on a fixed price and the rest on the spot market, or an entirely spot-market option.

Trustpower made some of its customers go onto the spot market last winter, after electricity supply contracts came up for renewal.

Company spokesman Graeme Purches said all present customers had been offered fixed prices for electricity, but there was no guarantee this could continue for the rest of the year.

A spokeswoman for Genesis Energy said it was still offering fixed price contracts.