Putting a price on power

By CHRIS DANIELS

Energy Minister Pete Hodgson has announced the true cost of generating electricity.

A report by East Harbour Management Services, commissioned by the Ministry of Economic Development, examines the "long-run marginal cost" of setting up a gas-fired power station.

New combined cycle gas-fired power stations are widely viewed as the cheapest method of generating electricity.

State-owned power company Genesis is about to build such a power station at the site of its existing Huntly station.

Contact Energy has shelved plans to build a similar station next to its existing one at Otahuhu, saying it could not be assured of getting enough gas at a cheap enough price.

The report says that with a gas price of $3 to $3.50 a gigajoule the long-run marginal cost of electricity generated from a new station is about 4.7c to 5.1c a kilowatt hour.

It says the going rate for electricity for commercial and industrial consumers, excluding line charges, is at present about 5c to 6c a kilowatt hour.

Every extra dollar on the price above $3 a gigajoule would add about 0.8c a kilowatt hour to the long-run marginal cost of electricity.

Information on gas prices will interest many electricity users, as the future price and availability of gas is uncertain.