Save power or run risk of blackouts

By VERNON SMALL deputy political editor

Cut your electricity consumption by 10 per cent for the next 10 weeks or face the threat of blackouts in September.

That was the blunt message from the Government yesterday after top-level talks on the looming power crisis.

"It's time now for me to ask New Zealanders, householders, people in offices or factories - all New Zealanders - to consider a target of 10 per cent reduction in consumption," said Energy Minister Pete Hodgson.

He emerged from a two-hour meeting with industry and consumer representatives promising to ask the state sector to lead the way with 15 per cent savings, although that might exclude hospitals and schools.

But the steps taken should be sensible, such as turning down water-heating thermostats and switching off unneeded lights and appliances.

"It is not time to go to bed early. It is not time to panic. It is really important that New Zealanders use as much electricity as they need for their basic comfort because if they don't we will end up with people being hurt unnecessarily."

Mr Hodgson did not want to see hospital ward temperatures reduced inappropriately or cold schools.

With those provisos, he would take the 15 per cent state sector conservation target to the cabinet for approval on Monday.

In June, the power system was at "stage one", a "modest" chance of problems, but the situation had now entered what he called "stage two", a moderate chance of blackouts.

Stage three would be when blackouts happened.

"There is now a medium-sized chance we are going to run into difficulty," said Mr Hodgson. "The aim is never to get to stage three. Stage three is not pretty."

The country reached stage three in 1992, when measures were taken to cut consumption by 15 per cent. With current weather patterns, stage three would be reached in September.

The National Institute of Water and Atmospheric Research has predicted average rain in the South Island hydro lake catchment in the next three months. But that may arrive as snow, which takes time to melt. Lake Taupo is expected to have average to below-average rainfall.

From tomorrow, milder temperatures are expected over the North Island, but a cold front is expected to lower temperatures in the South Island.

"Nobody is saying it is time to press the panic button," Mr Hodgson said. "Everybody is saying it is time to take some action."

Industry and consumer representatives would meet again on Tuesday to discuss how to lower prices. In the meantime, he said, other measures would be taken to try to bring down soaring wholesale power prices.

One unnamed company would put 80 megawatts of power on the market from October 1 when some businesses' contracts run out.

Another was prepared to offer some "interruptible" load soon provided it could call on it if needed.

At the same time, national grid operator Transpower would lower the security standard on the grid on good weather days when there was not a high chance of transmission blackouts.

"It means we can get more juice through the lines because you don't have to hold as many in reserve," Mr Hodgson said.

That alone would increase supply by 1 to 2 per cent.

To promote savings, the Government would launch a publicity campaign next month.

Mr Hodgson said he had also urged electricity retailers to "buy back" power from consumers by giving them rebates when they reduced consumption. Some had agreed and others would explore alternative ways to achieve the same end.

One would try to negotiate 175 megawatts of power savings with a few major customers.

He said he believed the measures together would allow the situation to "bottom out satisfactorily".

It was not clear what impact power savings would have on the high prices, which have hurt businesses exposed to the spot market.

Hydro storage on July 6 was 55 per cent of average. Key South Island lakes Pukaki and Tekapo, which together account for 60 per cent of national hydro storage, were at 42 and 37 per cent full respectively. Taupo was 11 per cent full.

Storage totalled 1323 gigawatt hours compared with a maximum storage of 4267 gigawatt hours.

It is still significantly above the low point of 500 gigawatt hours, hit during the 1992 crisis, when interisland ferries were used to feed power into the national grid.

That crisis trimmed $600 million, or 0.6 per cent, off economic growth.

"My preoccupation is to get through this for as low a cost as possible,"Mr Hodgson said, "but it is already clear the cost will not be zero - there is already damage being done."

Meanwhile, Bluff aluminium smelter Comalco might close one of its three potlines, saving about 170 megawatts of power, if the crisis deepens.

Meridian spokesman Alan Seay said the state-owned generator had the right under its contract with Comalco to close a potline but it would have to pay compensation. The amount was confidential.

Mr Hodgson would not confirm that, but said talks had been under way for several weeks with commercial interests.

Energy analyst Simon Terry said an alternative would be for Comalco to on-sell power from its cheap contract which customers could buy directly.

But there were political sensitivities in highlighting the sweet deal Comalco had on power.

Officials have already proposed in briefing notes to ministers that market participants "will have the right incentives to enter into negotiations with Comalco" if there are significant shortages or high prices.

Mr Hodgson said he had "curtailed" discussion at yesterday's meeting about how to increase generation to avoid future crises, because that would not deal with the immediate problem, which ran until October 30.

He rejected the suggestion that state-owned generators were making big profits from the crisis, with Meridian actually a net buyer of power on the wholesale market.

But National Party energy spokesman Tony Ryall said Mr Hodgson's efforts were a "possum in the headlights" approach.

"SOEs are still creaming it. Until he tells them to stop profiteering, the problem won't go away. Real companies in real markets don't kill their customers."