Consumers stuck with power worry

By KEVIN TAYLOR political reporter

Finance Minister Michael Cullen and Energy Minister Pete Hodgson will today announce proposals to reform the electricity sector to ensure security of supply in dry years.

The country is confronting a looming winter power shortage, but most of the changes will probably centre on longer-term proposals that will have little effect this year.

Consumers have been told to save 10 per cent on power use, but savings are just over half that figure.

Prime Minister Helen Clark said yesterday that legislation would be drawn up as part of the proposals, but she refused to detail in any way what the Government would announce today.

"The whole announcement is geared at security of supply," she said after Cabinet yesterday signed off on the proposals.

She refused to answer questions on whether consumers would have to pay higher power bills. There is speculation the industry will be levied to fund plans to avert future energy shortages.

She told television's Breakfast show there would be a public consultation period on the proposals and then legislation would be introduced.

Market watchers are picking no radical transformation of the industry, but expect the Government to intervene to ensure that sufficient generating capacity is kept in reserve for dry years such as this.

One method would involve the Government paying generating companies to maintain unused capacity.

Another possibility is expanding the powers of a soon-to-be formed Government-appointed governance board to ensure emergency generation was available for dry years.

The Government has blamed the looming crisis on a lack of rain filling the hydro-storage lakes, although the National Government's reforms, which created the electricity market, have also come under fire.



Former National energy minister Max Bradford said that if the Government dealt correctly with the dry-year security problem - an issue for 30 years - today's package would be useful. But, if the costs were levied across all electricity producers, it was likely to create longer-term problems and disadvantage more marginal or higher-cost producers.

* Consumers made power savings of 5.9 per cent on Saturday and 5.8 per cent on Sunday.

The MetService predicts 50mm - 100mm of rain over South Island hydro lakes this week.