Power price putting paid to pulp

Hawkes Bay's largest timber processor, Pan Pac Forest Products, has cut pulp production by up to 60 per cent daily because it was having to pay up to 20 times more for electricity on the spot market.

Managing director Stuart McKinlay said the company's monthly power bill had almost doubled to $5 million since the crisis, attributed to low hydro lake levels in the South Island, began almost two months ago. The company has no plans to lay off staff while it makes the pulp production cuts and its sawmilling operations have so far not been affected.

About 60 per cent of the electricity the company uses is bought under contract and the rest is bought, in half-hour intervals, on the spot market.

Normally, the spot market price is about 5c a kilowatt-hour but at times since mid-May, particularly early morning and early evening, it has soared to about $1 a kilowatt hour.

"At these unbelievably high prices we cannot afford to continue normal pulp production," he said.

The cost of electricity accounted for a third of the cost of pulp.

The company is cutting production between 7 am and midnight, when domestic power use peaks.

- NZPA