The 'Kiwipower' model and MRP
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Originally Posted by
Vaygor1
The problem the govt has always had with NZ's electricity business has been with the transmission side of the business where each lines company owns a monopoly... you don't see two sets of power poles going down each street, each owned by a different lines company. It is here that asset valuation vs profit controls are required, as is already the case. These businesses are valued under ODV (Optimal Deprival Value) and regulated already.
I agree with this.
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MRP already compete with every other generating company today. Under any model/mechanism that a greens/labour coalition might introduce, that won't change.
Quoting from your referenced post Vaygor
"Generating involves owning and operating power stations and feeding the national grid and GETTING PAID for doing so.
Retailing involves marketing, getting customers (by promising to deliver electricity at a $/unit volume), reading meters, invoicing, chasing bad debts, and PAYING the Generators for the electricity it has promised to deliver."
My understanding of the proposed 'Kiwipower' model differs from yours.
Under the 'single buyer' ('Kiwipower') model there will only be one energy price for consumers. A Labour/Green government will tell us that this is the lowest price possible, obtained by turning the screws on all those greedy generators by legislating that they must sell the energy they generate to 'Kiwipower' on an historical cost generated basis. Competition will remain for generating incremental new power. Kiwipower will call tenders from the big 5 and accept any new incremental power project at today's cost. When selling this new power however, it will just go into the overall soup of energy inputs already contracted, and all power will be sold at a new national average cost.
So whereas MRP will 'compete' in the future, it will IMO only compete at the incremental new power generation wholesale level. The retail price will be calculated by 'Kiwipower' for all small power consumers, so no real competition there any more.
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MRP would be supported by the Greens more than its competitors due to their (MRP's) geothermal/hydro generation capability.
It will be a Labour/Green power policy, not a Green power policy. There is no need to 'support' MRP because their hydro and geothermal generation already exist. What Labour/Greens support is lower power prices for consumers. The MRP geothermal stations should be OK because they are reasonably modern and have not been comprehensively revalued over the years. Some of the hydro assets are more than 50 years old and so are ripe for a balance sheet revision - downwards. Once the dam valuations are reduced to historical levels, the price of power bought by Kiwipower from MRP will also fall to historic levels. That will hurt MRP shareholders big time.
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If there is any control to be exerted by bulk-buying, it would affect the retail side of the gen-talier companies and MRP would remain essentially untouched imho.
But MRP is a retailer as well as a generator. So if retail prices charged are affected, how can you claim that MRP will not be affected?
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Asset valuation for MRP (whether overstated or not and I doubt it is too overstated... it is audited) has more to do with calculating NTA from an investors viewpoint more than its 'allowed' profit levels.
I think that statement is entirely wrong. The revaluation in asset values upwards (particularly hydro dams) is entirely due to those assets becoming ever relatively cheaper generating units. Under the current model power prices are set at the generation price of the newest station in the network. However the cost of power generation at the old stations does not go up. The profit margin does, which is why those old hydro stations have incrementally become so valuable over the years. Conversely if the wholesale price of power were to fall, then the value of those power stations would fall too.
SNOOPY