Big users demand drop in price

By CHRIS DANIELS

Big power users are still hurting and being forced to pay unreasonably high wholesale electricity prices, says the Major Energy Users Group.

The co-ordinator of the Winter Power Taskforce, Dr Patrick Strange, yesterday announced the end of the public advertising campaign that has urged consumers to make electricity savings of 10 per cent.

The Users Group's executive director, Ralph Matthes, said this meant there was now no reason big electricity users, who bought power on the wholesale or "spot" market, should be paying high prices for their power.

He said Strange had been right in saying the public no longer needed to save 10 per cent, but he should be encouraging at least 5 per cent savings.

In the past few months, big power users such as the Pan Pac pulp mill near Napier, Comalco's aluminium smelter at Tiwai Pt in Southland and Pacific Steel in Auckland have been forced to cut production.

Spot prices soared to nearly 30c a kilowatt hour and, despite their now falling to around 8c a kilowatt hour, these companies have yet to return to full output.

Matthes said the reputations of New Zealand firms had suffered in overseas markets, with some being unable to fill orders.

"There is very little, probably zero, chance of blackouts if we have relatively prudent savings, but why are prices almost 30 per cent more than what is reasonable?"

Spot prices should be in the range of 4c to 6c a kilowatt hour, he said, with 4c the price in a wet year, 6c in the dry winters.

Generators and Strange accepted there was virtually no risk of blackouts, so there was no valid reason for wholesale prices to be so high.

"The dominant generators, mainly the SOEs, are just milking us," said Matthes.

He singled out Meridian, New Zealand's largest hydro SOE, and Genesis, the largest thermal SOE, for particular criticism. They should have contracted with each other, with Meridian securing its dry risk against Huntly's thermal generation.

"I accept that profit is reasonable, if those companies had performed [and] had had innovative products to ensure New Zealand got through this winter without the Government having to step in - but they didn't.

"They were slack, they simply pushed dry-year risk off to big users and the public. They bore no risk and continued to make profits."