Electricity companies would be likely to “sue for peace” if a Labour-Green coalition government takes power at the 2014 election, to try to forestall plans to upend existing electricity markets, says Edison International Research in analysis of the Meridian Energy float.
Edison also suggests that electricity generators with large natural gas requirements to run some of their power stations would avoid “negotiations to contract further gas due to concern that, if the NZ Power proposal was implemented, they as thermal plant operators would not hold decision rights over when or even if they would be able to generate and dispatch to market.”
The Opposition’s NZ Power proposal would institute a central buyer system, rather than the current wholesale market, to determine the prices paid for electricity generation from each power station, based on its historic cost.
Edison research analyst Bruce Mackay told a teleconference that, at this stage, the firm had taken no view on what form such a “suing for peace” might take.
“Any proposal to make changes on the scale contemplated has impacts on all the participants” in the electricity market, Mackay said. “I think there’s a range of options there. There are incentives for generator-retailers, even Transpower, to try and negotiate or engage to get an outcome that doesn’t impact on them as severely as it currently stands.”
Edison’s is the second of two independent research reports commissioned by the stock market operator, NZX, to give retail investors access to alternative sources of advice on the Meridian float, which is open for registrations until October 18.
NZX has had no influence over the content of the reports and commissioned them in response to concern there was too little independent advice available before the May float of MightyRiverPower.