Power plant out for six months

By FIONA ROTHERHAM

Contact Energy's troubled Otahuhu B power station will be out of action for at least six months.

The near-new station's failed transformer will be repaired in Brazil.

David Hill, Contact's general manager generation, said three units from its ageing New Plymouth plant would produce the 360 megawatts usually generated at the South Auckland combined-cycle station.

But the New Plymouth plant is far less efficient and more costly to run.

The transformer failed the day after the plant was brought back to full capacity after being shut down for routine maintenance in May.

Contact was confident the full cost of the breakdown would be covered by insurances and under the original construction warranty with German contractor Siemens.

In its annual report, Contact said it had been paid $59 million in liquidated damages for year-long delays in commissioning the $300 million plant, and also had a further $26 million reduction in capital payments for the project.

The shutdown of Otahuhu B has already contributed to transmission line constraints that have pushed upper North Island spot wholesale power prices into the hundreds of dollars during peak demand.

Overall, wholesale prices fell last month compared with June, but there was a clear differential between regions.

On Wednesday, the South Island price had dropped to 2.5c/kWh on the back of lower demand and plentiful hydro generation, while the Auckland price remained at 3.4c/kWh.

Philip Bradley, chief executive of MCo, which oversees the spot market, said the extended shutdown simply returned the market to where it was a year ago, before Otahuhu B was commissioned.

"Your distance from generation will determine your wholesale price and included in that is the cost of transporting the electricity."

Retailers were covered by price fluctuations through hedging and had factored-in the shutdown.

Long-term, it could force price increases to upper North Island consumers, Mr Bradley said. Offsetting that was an expected drop in demand after this month.

Mighty River Power chief executive Doug Heffernan said he did not anticipate any price rises for consumers but, in the long run, larger industrial users might be affected.

Meanwhile, Contact today appointed a stand-in chief executive for Paul Anthony, who resigned last month.

Stephen Barrett is from Contact's 40 per cent shareholder Edison Mission Energy and has worked in the energy industry for 28 years.

Contact's share price closed up 2c at $2.63 yesterday.