Action plan set up to fight future power crises

By CHRIS DANIELS

Big power users will still be hit with price rises if there is another cold, dry winter, but an emergency plan has been drawn up to handle another electricity crisis.

A committee of national grid owner Transpower, the Energy Efficiency and Conservation Agency, the big power firms and M-Co, which runs the electricity market, has set up measures which will go into force if there is a repeat of last winter's conditions.

The committee said long-term loss of a thermal plant, such as Contact's Otahuhu B station or part of the Genesis station at Huntly, in a dry year would trigger the action plan.

The main industrial and commercial power users that decide to buy electricity on the volatile spot market would then be hit with large price rises or "price signals".

While the power companies say it is too early to predict what will happen during winter, the weather experts offer some hope.

Scientists at the National Institute of Water and Atmospheric Research say long-range predictions indicate a warm winter is likely.

Last winter was the coldest for 30 years.

Hydro lake storage levels are 18 per cent higher than a year ago and thermal power stations are generating a bigger proportion of the country's electricity than they were a year ago.

This possibly shows a more cautious approach to water conservation than last year.

National demand for electricity is also down from last year.

There has been only 1 per cent growth in the South Island, when many expected a 5 per cent increase in demand.

This could be partly due to the warm start to the year.

Outlining what would probably happen in an extremely dry year, Transpower's general manager of commercial services, Bill Heaps, said the first warning sign for the committee would be a power-price rise on the spot market.

This would encourage the operators of thermal power generators to produce more electricity because hydro owners would be starting to conserve increasingly precious water.

After this, the big industrial and commercial users would start cutting back production because of the increasing power prices.

M-Co chief executive Christopher Russell said it was possible that some major users of electricity believed that a dry, cold year like last year was unlikely to happen again for a while.

So they were either keeping, or expanding their exposure to the spot market.

After the events of last year, businesses were more aware of the risks they faced in buying on the spot market and had organised their power contracts accordingly.

During the next stage of a dry winter, more electricity would start flowing from the North Island to the South Island.

Once all the elements were in place, Transpower would re-configure the national grid to help ease the situation, Heaps said.

Tension arose last winter between Transpower and the power generators over constraints in the national grid.

Electricity normally flows from the South Island hydro stations to the North Island.

But last year, electricity went from the North Island thermal stations to the South Island.

Transpower said its job was to ensure security of supply.

Increasing power flow from North Island thermal stations to the south would put homes and businesses in some areas, especially Taranaki, at greater risk of blackouts.

A public energy conservation campaign would be started only if several steps had occurred - increased prices, more thermal generation, a drop in demand and adjustment of the national grid.