Electricity firms try to avoid price surge

Genesis Energy fired up its expensive Huntly power station during a scheduled grid outage near Hamilton last Saturday. File photo / NZ Herald

Power companies say they have taken steps to avoid being hit with extreme spot prices again today when supplies are constrained in the upper North Island.

Last Saturday retailers were exposed to wholesale prices 200 times the norm as Genesis Energy fired up its expensive Huntly power station during a scheduled grid outage near Hamilton.

This led a string of complaints to the Electricity Authority from power companies Meridian Energy, Mighty River Power, and Powershop and big users exposed to the spot market including Westpac, ASB Bank, NZ Refining, Juken NZ, Vodafone, Telecom, Auckland Museum, Nufarm and NZ Sugar.

They have lodged claims of an "undesirable trading situation" and hope to avoid having to pay prices of nearly $20,000 per megawatt hour.

Genesis said it needed to cover the cost of Huntly and that wholesale customers knew of the outage and had the opportunity to hedge or lock in prices in advance if they wanted to cut their risk.

The authority has ordered a delay of final prices for last Saturday while the claims are investigated.

Transpower says the outage today will be similar during upgrading of the upper North Island grid.

"The April 2 outage has been outlined in the outage programme since late last year and we can see no security of supply issues," a spokeswoman said.

Mighty River Power said it has been contacting spot customers to ensure they are aware of the potential for a repeat of last Saturday's exceptionally high wholesale prices which would hurt them financially.

The company supplies Auckland customers through its Mercury network. Its gas-fired Southdown power station in Auckland would run at full capacity throughout the outage.

It was also working with large commercial customers to reduce demand where possible.

Mighty River would also "be using other appropriate and prudent options" to mitigate the potential commercial risk to the company of an abnormal spike in wholesale prices in the coming weekend.

It has calculated its balance sheet may be hit by $25 million as a result of the price spike.

Small retailer Powershop says high prices could cost it $1.7 million.

Chief executive Ari Sargent said his company had asked for contract prices from Genesis. "We can't afford another 'million dollar weekend'."

Genesis said it had spoken to retailers during the week but could not give details of any hedging arrangements.

The authority said a comprehensive set of reforms was under way to improve performance in the spot and hedge markets.