The following letter was published in the Timaru Herald:
Taking 1.1 per cent of Meridian's water flow from Lake Tekapo would reduce their nominal electricity generation by 1.1 per cent. This equates to 85 GWh annually from the entire Waitaki power scheme (which is enough to power Dunedin for a month).
In 2003 Meridian stated the irrigation scheme would cost them $9 million in lost revenues (not to be confused with the $100 million they claim it will cost the country). If you sell 85 GWh for $9 million then you're getting a price of 10.6 c/KWh so their figures sound about right.
If farmers were to compensate Meridian for the lost revenue then I calculate that it would cost them around $300 per megalitre of water. This figure is three times as much as the average cost of water for irrigation in Australia.
The real answer as pointed out by Meridian's Alan Seay is to introduce tradeable water rights. Having a water market is the most efficient way to ensure that water is being put to its best economical use.
Murray Clevery's analogy that "water is gold" is an excellent example of why water should be traded. The value of gold comes from both its scarcity and its tradeability.
For this model to work, Meridian would have to be stripped of its exclusive water rights and bid for its water alongside all the other interested parties. Only then will we be able to determine the true value of our water.
Extra information that wasn't included in the letter:
Some expenses can be recouped from a powerhouse at Burkes Pass and augmented flows through the Opuha powerhouse.
A cumec is a rate of flow (cubic meters per second). Unless the duration of the flow is given then it's difficult to tell the quantity of water involved. Luckily we know that the AWT are after 1.1 per cent and Mr Sutton disclosed that the annual mean flow out of Tekapo is 82 cumecs so the flow duration can be calculated as a total of 22.5 days per year. This quantity of water equates to 6.5 mm of rain over the 30,000 hectares being irrigated.
This year Meridian started saying it will cost the country over $100 million. In turn, this has been twisted into saying that it would cost Meridian $100 million. I put this down to poor reporting and it's already tripped up one reader. B Fogarty (December 2) remarked that the other 98.9 per cent must be worth $8.99 billion to Meridian whereas the remaining water is actually worth $809 million to Meridian.