Electricity situation 'not satisfactory' says PM

2.45pm

BRUSSELS - Prime Minister Helen Clark today repeated her message that policy changes to improve the electricity system in New Zealand are in the pipeline.

Power consumption has dropped just 3 per cent after the Government asked consumers to lower usage by 10 per cent and unless substantial rain restores the level of low hydro lakes consumers could face rolling blackouts.

Helen Clark, speaking from her European tour, said the Government could not fix the problem overnight.

"One thing the Government can't do is make it rain, no matter how many chants and prayers are offered," she told NZPA.

However, she was unhappy with the status quo and repeated her threat made in March that significant changes could be made to the electricity market model set up under the previous National government.

"What I signalled quite a few weeks ago now, is my complete dissatisfaction with the nature of the energy market, which I don't think gives appropriate signals about the level of investment needed to secure energy supply," Miss Clark said.

"That's why, at the same time as we manage through a short-term issue, which is the winter power supply, we are focusing very hard on the policy changes needed to get a better functioning electricity system.

"It's not a satisfactory situation to be in and there has to be change to guarantee electricity supply -- you can't be satisfied with a power supply that is only fully functional when it rains."

The National government in 1998 ordered combined lines and retail companies to split their businesses, with then energy minister Max Bradford predicting prices would fall as generators competed for customers among the retail companies and householders switched between retailers.

However, Miss Clark said just over a month ago that the Government believed that model had had "unintended effects" and was "contemplating change which could be significant".

A group of cabinet ministers, headed by Finance Minister Michael Cullen, has been set up to look at the issue.

The Government has received a barrelling from opposition MPs, who say something should have been done earlier to avoid the problems.

Energy Minister Pete Hodgson admitted in Parliament yesterday that the Government had known about the danger since late last year.

National's energy spokesman Gerry Brownlee said Mr Hodgson had failed the country by not raising the alarm in time and had not done anything this year to avert a crisis.

National and ACT MPs said the Government should have amended the Resource Management Act which was blocking new hydro projects.

Mr Hodgson said the issue was not new electricity generation, but the lack of rain at existing plant sites.

- NZPA