After little more than a week of soaring spot power prices, which has forced some big users to cut production, Clark's government has decided to act and bring more control to the deregulated industry.
Clark yesterday said her government was considering significant changes to the present market model, which was largely developed and implemented in the late 1990s by then Energy Minister, Max Bradford, during the last National-led coalition.
She gave no details of what those changes might be, though they will inevitably mean more government intervention in the electricity generation and retail markets. An infrastructure committee led by Finance Minister Michael Cullen has been set up to look at changing the market. "Markets are inherently shortsighted and for security of energy supply longer term investment horizons are required. We're contemplating change which could be significant," Clark added.
It is understood changes could target the market as a whole, or concentrate on the three large government-owned power companies, with one of the more radical being the splitting of Meridian, Genesis and Mighty River Power into separate generation and retail arms. Major users say this will encourage the building of more power stations, though critics say the ownership of retail bases makes it easier for generators to raise the finance to build those new stations.
New Zealand's average power price for last week was $NZ233MWh (23.3c kWh), the highest since August 2001, while electricity monitoring company M-co says national storage is only 81% of the average, and national hydro lake inflows are only 54% of the average.
United Future leader Peter Dunne says the government appears to have no plan to avert the impending energy crisis. "Do we as a country have a post-Maui strategy? I certainly haven't seen one, nor am I fully confident that there is one," he said yesterday. Uncertainty about international oil supplies, combined with opposition to building alternative or new power stations, meant any electricity shortage could quickly become catastrophic.
This country's largest trade group, the Engineering, Printing and Manufacturing Union, has also joined major energy users in calling for government intervention in the power sector.
In a separate development, Energy Minister Pete Hodgson yesterday announced the establishment of a Grid Security Committee to plan and prepare should there be another cold dry winter. "I have made it clear to the industry that I expect it to take a more active leadership role this year in responding to the risk of a dry winter," he said.
Because the committee had high-level representation, including the chief executives of the big generators and the head of Transpower which owns the national grid, it would be able to make substantial decisions that could be implemented promptly. It also gave consumers a voice, which was important when electricity price and supply issues were of such concern, Hodgson added.
The GSC is due to meet today to discuss electricity supply and demand issues arising from the prospect of a dry winter for New Zealand's hydro-dominated electricity system.
