Price spike pulls plug on NGC's half-year

By RICHARD BRADDELL

New Zealand's largest electricity retailer, Natural Gas Corporation, yesterday warned that it was unlikely to make a profit in the current six months, because of this week's dramatic jump in wholesale electricity prices.

NGC has blamed South Island hydro storage, down to 61 per cent of its usual level, for the spike in the price it is paying for power.

It says these prices come on top of price levels that have tended to be high, because of transmission constraints and the unreliability of thermal generation.

NGC reported a net profit of $31 million for its December half.

The company accounts for nearly 30 per cent of electricity consumers, but has only 6 per cent of the country's generation capacity. This imbalance exposes it to price changes in the wholesale power market.

It said its current problems were the result of insufficient hedge contracts being available and the recent bidding behaviour of the generating companies.

On December 31, NGC had 480,000 retail customers, most of whom were acquired through its takeover of TransAlta, now known as On Energy.

NGC's ownership of several generation schemes entitles it to around 3560GWh of electricity a year, but this is well short of its annual retail demand of 8000GWh.

The company's announcement came a day after Energy Minister Pete Hodgson said lower than usual hydro levels were posing a modest threat to power supplies.

Lake inflows had been only 39 per cent of their usual levels in the past week, but lake levels were still around double those of 1992, when power conservation measures were introduced.

Thermal stations commissioned since 1992 would fill part of the hydro shortfall, but that had not prevented the lift in wholesale prices.

NGC said yesterday that the rest of its business had been operating well.

Generation, the gas network and trading assets made up 74 per cent of its assets and these provided a solid foundation for it "during this difficult time for electricity retailing."

The Commerce Commission yesterday cleared NGC to buy the Hutt/Mana gas distribution network from AGL Energy.