Electricity market's survival linked to crisis warns Government

The electricity market has again been warned by the Government that its survival depends on its response to a potential power crisis.

Energy Minister Pete Hodgson said yesterday that the electricity sector understood it was on notice.

"I told the industry in 2001 that an effective response to the supply difficulties of that year was crucial if it wanted the electricity market to survive," Mr Hodgson said.

"That message has been driven home even more firmly this year."

He said electricity leaders had been told that their response this year must be better than it was in 2001, when the country last faced the prospect of a dry winter.

Uncertainty over the gas supply and low hydro lake levels have led to fears that power prices could soar and eventually lead to blackouts.

Recent wholesale prices have been almost as high as they were at the beginning of the 2001 winter power crisis.

Inflows into the main storage lakes were 70 per cent of average for March, and at the end of the month hydro storage stood at 76 per cent of average for this time of year.

Mr Hodgson said if hydro dams ran low then uncertainty about gas meant more coal and oil would have to be burned to generate power. He had been working closely with the industry to ensure enough coal was available, but more was needed.

"The market does not have adequate access to information about thermal fuel supplies . . .

"So I am making it clear to those holding the relevant information on thermal supplies - including state agencies - that I want this data reaching the market sooner."

In the long-term, Mr Hodgson said he and the industry were looking at a range of options to sort out problems.

A main problem was that the market only worked meaningfully with managing and supplying power.

More effort had to go into managing demand and increasing efficiency.

Possible solutions

* Separating electricity generation from retailers.

* A levy on spot-price power to subsidise building dry-weather reserve generation.

* A single wholesale buyer and seller of generation.

* Forcing retailers to contract for 100 per cent of their forecast demand.

- NZPA