More companies worry about power

By NZPA

Thursday 20th March 2003

Summer is barely over yet large manufacturers are already idling plants to save power as they did in the middle of 2001, when prices soared during the driest winter for 70 years.

Tasman paper mill owner Norske Skog said it had reduced capacity by about 10 percent, and was running at a loss for some of its business in order to meet contracts with its customers.

"Continued high-end electricity prices could accelerate a reduction in capacity of this site by as much as 20 percent," a Norske Skog spokesman said.

"We've been trying for some time to increase the certainty of our electricity price, and there's very low liquidity in products to do that."

Planned maintenance for 10 days starting next week would provide temporary relief, he said.

The Comalco Tiwai Pt aluminium smelter has had production cut indefinitely following a jump in average spot prices of 50 percent in the past week.

And according to the Major Electricity Users group, pulp-maker Pan Pac in Hawke's Bay halted production yesterday as prices climbed to $800 a megawatt hour (MWh) at times.

At the North Island reference point of Haywards, prices averaged $149.35 MWh in the week ended Wednesday, compared with $93.38 MWh the previous week, data published by market administrator M-co said.

The prices have been driven by below-average inflows into the South Island's hydro-electric lakes, power station shutdowns for maintenance and rising uncertainty about gas supplies.

Annual demand for power was also rising.

The Engineering, Printing and Manufacturing Union (EPMU) has added its voice to those calling for the Government to step in.

"We've got 350 workers at the (Fletcher Steel) Pacific Mills sitting around twiddling their thumbs, and millions of dollars of plant sitting idle because the spot prices are so erratic," EPMU national secretary Andrew Little said.

"The Government needs to act to make sure that industries are not at the whim of an out-of-control market."

Genesis chief executive Murray Jackson said the company had on-going hedge contracts for 3000 customers, of 12 months' duration.

"Genesis is working with other generators to try to improve the liquidity of the contracts market by sharing the risk."

Meridian spokeswoman Chris Montgomerie said the company was trying to maintain its obligations to existing customers.

"If any large customers are coming off existing contracts, we have a commitment to always offer them another contract..."

However, the price would often differ.

Many contracts were three years long, so a large proportion of customers were unaffected at present.

Meridian was watching the levels at its hydro lakes ahead of winter, and to conserve water it was generating only the amount for which it was contracted.

Inflows into South Island catchments, which provide the bulk of hydro generation, were just 52 percent of average last week.

The southern lakes hold between six and eight weeks of storage, so it is the inflows that are most important for security -- the dry year of 2001 began with very high water levels, but the lakes were never topped up during autumn.

Energy Minister Pete Hodgson said he was concerned about the price and availability of electricity.

"The Government is well aware that high wholesale prices for electricity are a significant problem for major industrial electricity users who buy power on the spot market."

The Government was maintaining a "very close" watch on the electricity industry's response, and Mr Hodgson said he would step in where necessary.

That was short of the request by National Party energy spokesman Gerry Brownlee that the Government hold an immediate inquiry into electricity pricing systems.

Finance Minister Michael Cullen said in Parliament today that while a dry year primarily affected large users of energy, domestic consumers would be asked to conserve power such as happened in 2001, should the dry year eventuate, "which looks possible at this point".

Comments from our readers

No comments yet