Calls for Govt action on power prices gather momentum

By NZPA

Monday 24th March 2003

Wholesale electricity prices spiked to fresh highs of 63.9c per kilowatt hour over the weekend, forcing major electricity users to continue keeping their production levels down.

And today United Future leader Peter Dunne said the Government appeared to have no plan to avert an impending energy crisis.

"Do we as a country have a post-Maui strategy? I certainly haven't seen one and nor am I fully confident that there is one," he said in a speech to the Hamilton Rotary Club.

Mr Dunne said uncertainty about oil supplies combined with opposition to building alternative or new power plants meant an electricity shortage could "quickly degenerate from the merely extreme to the utterly catastrophic".

At Pan Pac Forest Products sawmill near Napier, there was some respite in power prices over the weekend but output was still cut by 30 percent today.

"We don't have full cover," said pulp general manager Doug Ducker. "Electricity is a very significant part of our production costs so we're very sensitive to any price movement away from the base levels."

If the price hike continued, he estimated it would cost the company around $150,000 a day in lost sales. It was the earliest the company had encountered power price surges.

"In previous years we'd be encountering some of this in April and May and in 2001, into June July, but we haven't had to do this this early."

At Norske Skog's Tasman pulp and paper mill at Kawerau, where production had been cut 10 percent last week, 10 days of scheduled maintenance began today, enabling the company to avoid the need to buy spot power.

However, production would definately have to be cut back further if power prices remained as such high levels, a spokesman said.

Prices fluctuate greatly around the country but the average power price at this time last year $44MWh (or 4.4c a kWh).

New Zealand's average price for the week to Sunday was nearly six times that at $233MWh (23.3c kWh) , the highest since August 2001 .

Daily average power prices a week earlier was $NZ135.10 MWh.

Electricity monitoring company M-co said national storage last week was 81 percent of the average for this time of the year but national hydro lake inflows were 54 perent of the average.

An industry lobby group said major electricity users had lost at least $3.7 million in sales since March 1 due to the surging electricity prices.

The Major Electricity Users' Group (Meug) said it was expecting an explanation from Meridian Energy over its prices.

Meug chairman Terrence Currie said Genesis had a reason because half its Huntly power station was down for maintenance but there had been some "dramatic" changes in the South Island, where Meridian's generators are.

"We believe that that reflected a change in the water conservation management strategy of Meridian, hence our question."

Meridian has said previously that the spike is due to increased demand, below average lake inflows and uncertainty about gas supplies, which all affect its hedging policies.

Meridian has also been in the firing line today after confirming its $640 million purchase of Australian company Southern Hydro.

National has cricitised the company for not investing more in the New Zealand infrastructure.

But the company says its purchase will not affect its New Zealand programme which includes Project Aqua, a major dam on the lower Waitaki River.

Meanwhile, National's energy spokesman Gerry Brownlee, said the energy crisis was starting to hit householders and the Government should take urgent action to ensure sufficient generation capacity.

Mr Brownlee said Contact Energy had announced its Wellington customers would face a 3 percent to 6 percent average increase from next month.

"You can bet some of Contact's Wellington customers will be paying a lot more than 6 percent, with the company talking averages at this stage," he said.

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