No sign of retreat on sky-high power prices

Spot power prices showed no sign of retreating from soaring levels which have persisted since early June, traders said yesterday.

North Island reference prices averaged NZ$150.20 per megawatt hour for the week ended Tuesday, up from NZ$136.84 per MWh the previous week.

The market this month has continued the pattern set in June when reference prices doubled from May levels around $75 per MWh, driven by sliding hydro storage levels as the market entered the peak winter demand period.

But traders said yesterday that storage levels were now stabilising at a time when they would typically be drawn down.

"There is a lot of argument about whether prices need to be as high given that we are through June and into July," a trader said.

New Zealand daily maximum prices soared into the hundreds of dollars in the past week, reaching $524 per MWh on Monday, while minimum prices averaged $50.97 per MWh.

The New Zealand Electricity Market independent surveillance committee last month began investigating the soaring prices which have caused pain for retailers exposed to the spot market.

New Zealand's largest energy retailer Natural Gas Corp said last week it would sell its 116,000 South Island customer base to Government-owned Meridian Energy.

Traders said reduced generation from the major South Island Waitaki catchment and some beneficial inflows over the past two weeks had stabilised storage levels.

The Marketplace Co Ltd said New Zealand's total stored hydro capacity was 1914 gigawatt hours as of Tuesday, 75 per cent of average for this time of year.

The stored energy was unchanged from seven days ago and up 11 per cent over the past 28 days. Inflows over the past seven days were 61 per cent of average. South Island storage was up two per cent over the past seven days and up 17 per cent over the past 28 days.

More than 60 per cent of New Zealand's electricity generation is hydro based, using river flow systems and water stored in natural or constructed lakes.

A trader said typically the storages reach their lowest levels in August, with hydro generators drawing down water with some confidence it would be replenished by the spring snow melt.

- REUTERS