Meridian to battle Contact in court

By BRIAN FALLOW

Meridian Energy is suing fellow electricity generator Contact Energy over what it calls extortionate pricing during a shutdown of the Manapouri power station in May.

In papers filed with the High Court at Auckland, Meridian chief executive Dr Keith Turner says that if Contact is able unilaterally to set the price Contact has to pay to supply the Tiwai Pt aluminium smelter when Manapouri is shut down, Meridian would need to think seriously about abandoning work, two-thirds complete, to boost Manapouri's capacity by 200MW.

That would be enough extra capacity to supply 64,000 homes.

When Manapouri was shut down on May 20 Meridian had to buy electricity on the wholesale spot market to meet its obligation to supply the smelter.

Because of physical constraints, Meridian argues, Contact was able to dictate the price, which was more than six times the average price over the previous month. By the end of the day Meridian had paid $3 million more than it would have at a normal price, and it aborted what was to have been a two-day shutdown.

It claims Contact's behaviour amounts to a breach of the Commerce Act's provisions against abuse of a dominant position.

Meridian is asking the court to enforce a 1996 agreement for Contact to sell ECNZ power to supply the smelter when ECNZ was unable to do so itself. Meridian claims it inherited those rights when ECNZ was split up.

Contact denies the deed still applies.

Meridian is also claiming damages of $3 million.

The High Court will begin its hearing of the case next week.

Contact Energy spokesman Bruce Thompson said the company welcomed the opportunity to defend its position in court. "We operated within the rules. We regard the matter as sub judice and offer no other comment."

Meridian spokesman Alan Seay denied it was reckless of Meridian to proceed with the shutdown on May 20 when it knew Contact maintained it was not bound by the 1996 deed and there was no agreement with it on price.

"We expected to pay a premium but there was no indication we would be confronted with this kind of extortionate behaviour," said Mr Seay.

The $200 million Manapouri upgrade, which involves drilling a new tailrace tunnel through the mountain to Deep Cove, is already a year behind schedule. To complete it will require a 21-day shutdown, scheduled for December.

Dr Turner said the project would become financially unviable if Contact repeated its behaviour of May 20 during the 21-day shutdown.