KEY POINTS:
The orange light is on as New Zealanders are urged to conserve electricity to avert major power cuts.
It's not a "crisis" - yet - but international headlines saying that Kiwis are being told to "turn the lights off" and wash dishes by hand are harming New Zealand's image as an investment destination.
The problem is that even though New Zealand may well manage its way through the winter, the repetitive nature of these so-called one-in-60-year mini-crises is stoking perceptions the Government is not sufficiently focused on ensuring security of the national power supply.
Companies contemplating foreign direct investment, or local companies looking at domestic expansion, put security of supply high on their tick-box lists.
If there is a possibility they will not be able to run new plant at full tilt - or will have to postpone orders while they help the country save power - the investment decision gets that much harder.
Power generators pay their major customers to ramp down their use and recover some of that cost through the spot market.
But production cutbacks disturb the flow of exports, which does not help the balance of payments.
Barring extraordinary bad luck, the country will make it through the next few months without blackouts.
There are three elements to New Zealand's predicament.
Let's start with the positives. The electricity "market" is working the way it is designed to. The industry has already negotiated with major electricity users, such as Rio Tinto's Tiwai Point aluminium smelter, to cut production so there is enough electricity to cover ordinary business and household use.
Electricity Commissioner David Caygill has taken a careful approach, pragmatic rather than alarmist and pooh-poohing suggestions that the wholesale markets should be replaced with a single, centralised purchaser. "The idea is bizarre for at least two reasons," he says.
"First we would lose the very price signals which have put us in a better position than in 1992, despite worse hydro inflows. There is no reason to suppose that a single purchaser would have bought more capacity than the current system did this year... Changing the industry's structure yet again would make no necessary difference to the overall level of risk."
The Electricity Commission's job is to ensure that electricity is produced and delivered to all classes of consumers in an efficient, fair, reliable and environmentally sustainable manner.
The savings campaign which is now under way will help to reduce demand. But if the rains don't come, Caygill's job will be to make sure that any rolling cuts or voltage reductions are made in an even fashion so that no one sector suffers more than others.
The other key player is the National Winter Group.
This grouping of the national grid operator Transpower and major generators has been carefully co-ordinating since last October to determine the power system's ability to meet peak winter demand.
The industry players set up the winter group after problems with the Cook Strait cable and the loss of Contact Energy's New Plymouth power station.
The second positive is that New Zealanders will respond well to a public savings campaign - even though there will be some grumbles. There is still a one-in-five chance of full-on power cuts if lake levels are not restored.
But that's as good as it gets. The reality, and the negative element, is that New Zealand does not have sufficient reserve supply to cope with the years when drought affects southern lake levels.
The Government must take the blame for this predicament.
It needs to let the power industry respond appropriately by building new generators. It needs to remove the ban on new baseload thermal generation so that Genesis Energy can build another plant.
It needs to amend planning laws to put national interests first. So far, it is not heeding the message.
