ELECTRICITY

NZ power users face price surges

Uncharacteristic surging summer wholesale power prices have big New Zealand users nervously waiti...

The Major Electricity Users Group executive director, Ralph Matthes, has said he is worried about the reasons for the spike in spot prices, which started last week and caused Contact Energy to issue a statement warning of a possible income drop for the three months to December.

Matthes is reported as saying the industry was attributing the high prices to the shutdown of Contact Energy's Otahuhu B gas-fired power station, in Auckland, for three months for maintenance; constraints on the capacity of the Cook Strait transmission links; and low lake levels at Taupo, causing Mighty River Power to price power from the Waikato River at high levels. He said it was unclear how long the soaring prices would last.

M-Co, the company that runs the New Zealand wholesale power market, has released details showing November was a cool and dry month, with storage in the hydro lakes down from 107% at the end of October to 89% by the start of December.

However, the imminent thaw of the heavy snowcap on the Southern Alps is expected to help top up these lakes. Cooler weather has also meant increased demand for power, with constraints on the Cook Strait High Voltage Direct Current (HVDC) link spurring increased North Island spot prices.

Wholesale prices on the spot market were still high on Saturday, ranging between $NZ163-368 per megawatt-hour (MWh) for much of the day on Saturday at Otahuhu, $NZ116-145 per MWh at the Haywards substation just out of Wellington, and $NZ64-75 per MWh at Benmore in the South Island. Prices were much lower through November, and averaged between $NZ30-35 per MWh on November 30.

Contact Energy chief executive Steve Barrett said that despite Contact's average level of hedge being approximately 85% of its generation volume, it still expected the tight conditions and increased spot prices to have some impact on the company's net income for the quarter.

Barrett also cited some restrictions on gas availability, referring to the scheduled major Maui field shutdown and maintenance program, as one reason for the surging spot prices.

However, Maui Development Ltd chairman Lloyd Taylor said the scheduled major Maui field shutdown and maintenance program had gone extremely well, with gas availability in excess of 85% through most of the month-long project, though there had been a scheduled 12-hour shutdown of the field during the weekend.

The Maui Oaonui-Rotowaro pipeline had been packed with gas to cover this weekend period, with gas users asked to contain their take to the maximum daily quantity - "hardly a restriction", said Taylor from Wellington, "it was all part of the plan conveyed to Contact and others at the start of the maintenance program."

Also, New Zealand's largest gas user, Methanex Corporation, at the weekend announced the successful completion of a $NZ10 million maintenance turnaround, which had been rescheduled to take place during the Maui program, at its small Waitara Valley plant.

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