NZ electricity demand could outstrip supply 'in 5 years'

New Zealand is at risk of having electricity demand outstrip supply within five years, a report commissioned by the Canterbury Manufacturers' Association (CMA) says.

Yet the country had enough hydro resources, if unlocked, to supply the country's electricity needs at an attractive price to consumers, CMA chief executive John Walley said.

"New Zealand can have electricity that is in the highest decile for reliability and quality of supply and lowest decile in price.

"However, as this report shows, there needs to be direction and certainty for the industry," Mr Walley said.

The current system was failing to deliver to either businesses or household customers.

During the past decade, the cost of electricity had constantly been driven upwards and there were problems with transmission as this year's Auckland blackout showed.

The new report illustrated the flaws in the system since the reforms of the 1990s, Mr Walley said.

It also showed there would be no improvement unless there was a shift away from the incremental, just-in-time (often just-too-late) thinking for justifying investment.

"Given that the market is shaped in favour of the generating companies, there are no incentives to provide investment for further base load generation or the transmission capability to move power to where it is needed."

Meanwhile, the owner of the country's second-largest electricity distributor Powerco has warned that regulatory uncertainty has knocked this country to the bottom of its list of investment destinations.

Babcock and Brown Infrastructure (BBI) chief executive Steve Boulton said the Commerce Commission's August clampdown on electricity lines company Vector had undermined international investor confidence.

BBI rated the 14 regulatory jurisdictions in which it invests against principles of predictability, accountability, transparency and whether the regime was forward looking and gave a competitive commercial return.

It bought Powerco for US$680 million in 2004.

- NZPA