Rain takes pressure off NZ hydro lakes, for now

The fate of electricity companies relies on lake levels such as those at Lake Pūkaki. Photo / NZME

Heavy rain is taking pressure off the country’s hydro lakes, but more is needed to make up for the abnormally dry start to 2025, Chris Ewers, Meridian Energy’s general manager wholesale, said.

Wholesale power prices have been steadily increasing since the start of the year due to dry and calm weather, this week hitting $400 per megawatt hour (MWh) and over.

Most of the rain landed in the upper South Island catchments, but southern South Island catchments also got a useful dousing.

“We saw just under 200 millimetres fall in the headwaters of Lake Te Anau and about 130mm in the headwaters of Lake Pūkaki, so both of those events have helped lift lake levels a little,” he said.

Pūkaki is the country’s biggest storage lake.

“From what we can see from the events across the country, not only for our catchments but also for the North Island catchments, it’s a welcome boost, and the wind associated with it is also welcome because it allows you to generate less from your hydro,” he said.

Ewers said more rain was needed to restore the supply and demand balance.

“It was very helpful and it’s really good to see, but the system can absorb quite a bit more still.

“But it’s not a big game changer, unlike in previous years where we have seen a massive event.”

The big power companies are keen to avoid a price spike this year after a gas shortage and dry weather conspired to push prices to over $800 per megawatt hour (MWh) last August.

Since then, companies have taken measures to add more security to the system.

In February, Meridian entered a “demand response” arrangement with New Zealand Aluminium Smelters (NZAS), which will involve NZAS cutting its usage by 50MWh to take pressure off the grid.

Genesis Energy – which plays a key role in shoring up the system with coal and gas-powered generation when the system is stretched – has been stocking up on coal.

The company’s current coal stockpile stood at 465 kilotonnes (kt) as of Friday.

“We anticipate 770kt of coal arriving between April and the end of August 2025, with the option to order an additional 35kt,” the company said.

Ewers said “parties” were looking at what is available for gas, “so there has been movement there over the last four weeks”.

Brokers Forsyth Barr noted March had been another dry month, with hydro lake levels continuing to trend lower and wholesale electricity prices pushed higher.

“However, in a strong signal that dry year mitigations are in place, short-dated ASX futures prices fell despite declining hydro storage and gas production,” Forsyth Barr said in a research note.

“All of the generators are managing lake levels well below average, particularly the 100% renewable generators Meridian Energy, Mercury and Manawa Energy.

“We expect these companies to benefit the most in the short term if rain reaches the catchments in the coming week.”

Meanwhile, residential consumers can expect higher power bills this month after the Commerce Commission last year allowed national grid operator Transpower and local lines companies to increase power transmission charges.

The changes will average out to about an extra $15 a month for residential customers.

March was dry for most parts of New Zealand, and warm for the South Island, according to the National Institute of Water and Atmospheric Research (Niwa).

Below normal rainfall or well below normal rainfall was observed across much of the North Island, as well as the northern, western, and inland parts of the South Island.

Over 2025, temperatures were above average or well above average for most of the South Island, as well as parts of Wellington, Taranaki, northern Hawke’s Bay, Bay of Plenty and Northland, Niwa said.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.