Winter electricity bills set to soar

By JAMES GARDINER and JOSIE CLARKE

Big price rises forecast for electricity will hit householders and threaten to undermine industrial output.

With winter chills biting and New Zealand still heavily dependent on hydro power, drought in the South Island is lowering lake levels and trebling wholesale prices.

Worried factory owners say they may have to switch off, and there are fears that many of the poor will have to endure winter without power if bills soar and they are unable to pay.

But much will depend on the weather, and political sources suggest that Prime Minister Helen Clark is deeply concerned about the political fallout if power bills jump.

North Shore and West Auckland customers of Wellington-based On Energy and those supplied by TrustPower in the Bay of Plenty and elsewhere may be first to feel the sting of higher prices.

And switching suppliers may not save them if the competing retailers raise their charges to cash in.

On Energy, formerly TransAlta, has about 6 per cent of total generating capacity but about 30 per cent of New Zealand's 1.7 million customers.

That means it buys most of its electricity through the wholesale market, where half-hourly "spot" prices are more than 21c a unit, three times the average for the time of year and twice what most households now pay.

TrustPower is also exposed, with 13 per cent of national customer base but 5 per cent of total generation.

By contrast, state-owned Meridian Energy of Christchurch has 28 per cent of generation and 6 per cent of customers, though it does have to supply the nation's largest customer, the Comalco aluminium smelter at a fixed price of about 2.5c a unit or pay compensation.

Meridian spokesman Alan Seay said yesterday his company was generating more power than it needed, so it could profit from selling the surplus to other companies at high wholesale rates.

The other big generators, Contact, Genesis and Mighty River Power also stand to gain.

Major Electricity Users Group executive director Ralph Matthes said though big industries such as the forestry mills and the Glenbrook steel refinery were exposed to fluctuating spot prices, they had financial hedge contracts that protected them.

If prices rose too high they would consider shutting down production to reduce exposure.

Although some in the industry point out that the key South Island lakes, Pukaki and Tekapo, are not as low as at the same time during the crisis of winter 1992, national demand for electricity has grown about 20 per cent since then.

In Wellington yesterday, senior politicians were briefed by Energy Minister Pete Hodgson, who is believed to have given some reassurances relating to plans to reorganise the industry.