Comalco claims exemption from dry-year reserve

Comalco, New Zealand's biggest power user, is trying to duck paying its share - up to $25 million - towards ensuring power supply in dry years.

The company also wants to be paid for reducing power consumption at its Tiwai Pt aluminium smelter when shortages loom.

Comalco, which consumes about 15 per cent of New Zealand's electricity, says it should be exempt from the Government's proposed levy that will fund power stations to be used only in dry years.

This "dry-year reserve" is the Government's answer to crises such as this year and in winter 2001.

A levy on electricity sales was expected to be less than 0.5c a kilowatt hour, making Comalco's share up to $25 million a year.

The levy would increase domestic power bills by about $40 a year and was expected to rein in $192 million annually.

A spokesman for Energy Minister Pete Hodgson said yesterday that the minister had not formed a view on whether Comalco should pay. He had yet to receive advice from officials on the dry-year reserve scheme.

Comalco said in a submission that it was paying for security of supply in its contract with state-owned generator Meridian Energy "and should not now be required to pay anything extra, directly or indirectly, for dry-year reserve".

"In brief, it is unacceptable for Comalco to be required to pay again for dry-year reserve to which it is already contractually entitled and for which it already pays."

What Comalco pays for power is a well-guarded secret but it is believed to have been getting power cheaply for three decades.

Comalco energy manager Jason Franklin said the company realised being exempt from the levy would be contentious. But it already had long-term contracts in place to secure electricity supply.

Comalco and all big electricity users are expected to benefit from the scheme because it would keep down wholesale electricity prices.

The Government is setting up the Electricity Commission to regulate the electricity industry, including contracting generators to provide dry-year reserve generation. Policy decisions had to be made by the Government on how it would apply the levy or recover the cost of dry-year reserve generation.

Comalco and forestry company Norske Skog, said big users should be paid to cut back electricity consumption as part of a range of ways of handling dry years.

The dry-year reserve excluded this "demand side" participation, possibly because of the false belief that big users would cut back anyway in a dry year, Comalco said.

- NZPA