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Meridian’s boss denies the energy company is profiteering and insists they’ve invested in the sector despite making millions in profits and dividend payouts.
Meridian released its annual report on Wednesday, showing a net profit more than 4.5 times greater than last year.
But while big manufacturing companies like Panpac and Winstones have shut down production to cut costs, the companies that generate and sell electricity say most households are yet to see big bumps in their power bills.
Meridian’s chief executive Neal Barclay told RNZ the percentage of household spending being directed at power bills had actually gone down over the past decade.
Consumer NZ said that was because many people were restricting electricity usage to cut costs.
Barclay told Morning Report that would be true for some households, but an overall lack of growth in electricity usage was likely linked to increased efficiency.
He admitted the profit was large but said that was because it was a big company.
“We are a very large business, a $16 billion business, so anything we do has big numbers associated with it.”
While about $500m was paid in dividends last year, about $430m was invested back into the business this year, Barclay said.
Claiming a lack of investment was “manifestly wrong”.
As were suggestions the company was sitting on consented projects, Barclay said. He said they had two projects they were struggling to get through the consent process and weren’t sitting on any.
“In the last 14 years in this country, demand hasn’t grown a bit… But in that time, not only Meridian, but across the whole sector, we’ve invested about $10b in replacing gas and coal-fired plants mostly. That’s effectively a quarter of the generation capacity has been replaced in the last 14 years.
“I don’t know what extra investment people had in mind.”
Barclay said the current energy crisis was down to dwindling gas supplies with gas being needed as a back up when hydro lakes were low.
Meridian was looking to move towards the majority of electricity being produced by solar and wind so the hydro lakes could become the back-up storage option, he said.
“It’s a very competitive market. And if we don’t build our next most viable project whether it be wind or solar then someone else will.
“Overtime all the modelling suggests if we deploy more renewables in this country, energy prices will come down.”
And Associate Energy Minister Shane Jones’ claims of “ridiculously high” energy costs and “stupendously high energy dividends”?
“He’s wrong,” Barclay said.
‘Not the full picture
“For most residential customers, the price of electricity over the last 10 years has not gone up at the same rate as inflation, so what we do know is electricity as a percentage of many households’ overall income has actually gone down,” Barclay said.
But the powerswitch manager at Consumer NZ, Paul Fuge, said that was not the full picture.
Forty percent of any power bill was made up of lines charges, he said, which were subject to regulation from the Commerce Commission, and only changed every five years.
“The prices were set in a low inflationary period,” he said. “So what that means is the lines charges in the last five years have served to flatten the overall electricity price.”
When they do reset from next April – simply to keep pace with the rising costs faced by lines companies – Fuge said power bills could go up on average about $200 a year.
Other factors were also keeping power bills down: households were using less electricity, with appliances becoming more efficient and families getting smaller.
“On average, household consumption is dropping, and that means even if prices go up, overall costs can go down, proportional to other things.”
It was like getting a smaller car – you spent less because it was more efficient, not because the price of petrol had dropped.
And more concerningly, he said, 11 percent of people reported purposefully under-heating their homes to reduce their power bills.
“That’s a worry when it’s things like heating.”
And he warned power retailers could not keep their prices low forever.
As they repurchased power hedges – that is, locking in power at a certain rate for the next few months – the wholesale cost of electricity would begin to push prices higher for more and more households.