Mike Fuge: Contact Energy chief executive says government interventions will slow energy sector down

One of the country's largest electricity generators and retailers is adamant the market is working as it should be.

The Electricity Authority and Commerce Commission are continuing to look into accusations of price gouging by so-called "gentailers" - companies that both generate electricity and provide it to consumers.

It comes after four mills announced they were either downsizing or planning on shutting entirely, blaming soaring prices.

Contact Energy chief executive Mike Fuge told Mike Hosking government interventions will slow the market down.

“Government interventions have never had happy endings. And the same is what happened here when they announced the oil and gas ban. It hasn’t had a good ending.”

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Episode Transcript

Speaker 1 (00:00):
Let's bring it back home and try and work out
what's going on with our power system. Is it simply
a lack of rain, too much reliance on hydro, and
it'll get fixed when it does rain. Or is the
market broken with too many able to profit on tough times.
Contact Energy's chief executive, Mike Fusia is with us.

Speaker 2 (00:12):
Mike, Morning, morning, morning, Mike, how are you very well?

Speaker 1 (00:15):
Thank you? The right here right now, mills closing doors,
laying people off because they can't afford the spot price.
Do we all agree that that, in isolation is unacceptable?

Speaker 2 (00:26):
Yes, we'd never look key. We are doing it tough
at the moment, and that's never an acceptable outcome, and
so we're working hard at the moment to make sure
that that is not there for the medium and long term.

Speaker 1 (00:37):
Is the market broken?

Speaker 2 (00:39):
Absolutely not what the market needs at the moment and
the short term, what's happened is that it's been a
very dry July. We've got a gas shortage at the moment,
and there hasn't been much wind. We're working to whole
resolve those short term issues, but the real solution is
building more power stations, which is what we're doing at
the moment. The market isn't broken, the market's working. There's
a lot of investment going in at the moment to

(01:00):
build new renewable power stations.

Speaker 1 (01:01):
And when you say power stations, what are they.

Speaker 2 (01:05):
Geo thermal, the wind. We've invested over one point four
billion in building Tohara and to Hookah three. Tohara is
online at seventy five percent capacity. To talk of three
will be on shortly. We'll be making some announcements further
announcements sure shortly about further investments and power stations and
as batteries being built. So there's a lot going on

(01:25):
right now.

Speaker 1 (01:26):
What's the time frame on all of that coming to
market and fruition and therefore how much of that solves
the problem forever?

Speaker 2 (01:33):
Well, Tohara is online now. We expect to have it
up at full capacity in the next twelve months. To
Hooker three will be on in the coming months. That
those two power stations alone account for five percent of
New Zealand's total energy demand. We expect Sola to be
on in about a year and a half. So these
things are happening at a reasonably good clip.

Speaker 1 (01:55):
Are you typical of Gen Taylor's in the amount of
investment you're doing in the infrastructure are putting in or
are you an outlier or what.

Speaker 2 (02:03):
We're leading in terms of our levels of investment that
certainly the other gent tailors have been investing in when solid.
We're fortunate to have Geo Thermal in our portfolio and
we're building it out as fast as we possibly can.

Speaker 1 (02:15):
Was that onslow idea a problem in terms of investment
in the marketplace or not?

Speaker 2 (02:22):
Look, the whole thing was onslow was that it was
just going to cost a hell of a lot of a
money which would have come out of left field, and
it just sits there and it was a bit of
a bad smell. It didn't stop us. We got and invested.
We have this fundamental belief that kiwis don't go running
after spending billions of dollars in bad ideas, So we
got on and invested.

Speaker 1 (02:44):
The EA, where are they and do they have a
role to play in this particular scenario right here, right now?
What about the ComCom?

Speaker 2 (02:51):
The EA do have a role to play. They are
the regulator. They have regularly reviewed when market conditions do
get tight or unusual. Over the last few years, they
have reg reviewed and where change is being needed. They
have implemented that change around standards of trading and the like,
and so they have been an effective regulator and they
will look at the conditions now.

Speaker 1 (03:11):
Right here, right now, do we need LNG? Does the
government need to move on that, do you think or not?

Speaker 2 (03:17):
Well, LNG, like everything else, will take a bit of
time to get the engineering done to get it in place.
What we need right now is a bit more gas
and to make sure the power stations we have running
do continue to operate. And we're working twenty four to
seven to make that happen, and hopefully we can announce
over the coming days some relief on the gas front.
LNG is an option for the future, but it's going

(03:38):
to take a bit of hard work to get that
in place as well.

Speaker 1 (03:40):
And when you mean in the next couple of days
on relief on the gas front, what do you mean
by that?

Speaker 2 (03:45):
We expect to be able to access some more gas
in the coming days, where there's a bit of hard
work going in the background to.

Speaker 1 (03:51):
See, well, when you've got someone to shit out at
the back or something you found some.

Speaker 2 (03:55):
No, not quite that much, but we'll be able to
make an announcement in the next twenty four to forty
eight hours.

Speaker 1 (04:00):
We hope good will the government do you think end
up intervening or are they just trying to draw by this?

Speaker 2 (04:06):
Oh look, my strong advocacy is that the market is
working and that any intervention will just slow investment down
as we all turn and try and work out what
the intervention is. And that's what our experience from overseas
where government interventions have never had happy endings, and the
same as what happened here when they announce you all
in gas band, it hasn't had a good ending, all.

Speaker 1 (04:29):
Right, look forward to the announcement in the next couple
of days. Mike put who's the Contact Energy CEO.

Speaker 2 (04:34):
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