Full production too risky, says smelter

The country's sole aluminium producer said the risk of power shortages was still too high for it to consider returning to full production despite a recent fall in wholesale electricity prices.

New Zealand Aluminium Smelters, 79.4 per cent owned by Rio Tinto subsidiary Comalco, reduced production by 10 per cent in March when it stopped buying power on the spot market as low hydro lake inflows and tight natural gas supplies sent prices soaring.

The Tiwai Pt smelter near Bluff exported most of the 335,000 tonnes it produced last year, mainly to Japan, Korea and other Asian markets for use in electronics. Recent rains and a public campaign to cut consumption have helped wholesale electricity prices drop to four-and-a-half month lows of about $65 per megawatt hours in the past week.

"At the current prices we would be purchasing spot [power] if it were not for the fact that we're concerned about there still being a possible crisis during the winter," general manager of operations Tom Campbell said.

The production cut had cost the smelter, the country's largest electricity user, about $2 million a week in lost revenue compared to last year, he said.

Although the official "riskmeter" reflecting the chance of power shortages had been downgraded to "high amber" from "extreme red", Campbell said the risk remained high.

"We would expect it to return to at least 'normal' before we would return to spot power," he added.

State-owned electricity company Meridian Energy supplies 90 per cent of the smelter's power under a long-term contract. The balance of the smelter is owned by Japan's Sumitomo Chemical.

* The Winter Power Taskforce meets again today and will announce any change to its "riskmeter" following recent rain.

Public power savings have dropped to a little over 5 per cent, though colder weather and the need for heating is partly responsible for this increase in electricity use.

- REUTERS