Blackouts 'likely without savings'

KENT BLECHYNDEN/Dominion Post

TIGHT SUPPLY: High power prices are damaging production while delivering huge windfall profits to generators.

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Blackouts are "very possible" in the North Island and probable in the South Island if huge power savings are not made now, according to a business group.

With a winter power shortage looming, storage is down to 56 per cent of average, the worst since the 1992 power crisis.

Wholesale power prices were up to 10 times higher than normal yesterday.

The Employers and Manufacturers Association is urging its members to make all the workplace savings possible to avoid blackouts and is calling for greater political leadership.

Some industry experts say drought has left hydro power lake levels so low that there is a risk of blackouts in about six weeks, repeating the crisis of 1992.

In the past week, wholesale prices have been more than four times last year's average and are expected to go higher next week. That is hitting some big users now, with higher prices likely to flow through to household bills in coming months.

The Employers and Manufacturers Association Northern said there was no political appetite for panic, but the country needed leadership now to save power.

"Where's the sense of urgency over the power blackouts we're facing?" asked chief executive Alasdair Thompson.

Tim Lusk, new boss of state-owned power giant Meridian Energy said: "Now is not the time to panic," though he admitted the situation would be more challenging if there was no rain in the next few weeks.

The need to begin a national power savings campaign was still weeks away, though that could change significantly if a big power station failed.

But given past experience, "at some point the drought has got to reverse", Mr Lusk said. "It looks totally manageable."

Because of the growing power shortage, Contact Energy announced on Wednesday that it would restart part of the New Plymouth power station.

The station was shut six months ago because of asbestos, but by early next month it will add another 100 megawatts to the power system, out of about 6000MW.

"Thanks goodness New Plymouth is back on the scene," Mr Lusk said. "That does help."

It was an example of many things the industry was doing behind the scenes, to get the last bit of power available.

"Meridian has been able to find more reserves and others have as well," he said. "The industry does work well together."

Meridian's lakes in the South Island had fallen and capacity was down, but not to an uncomfortable level. "It is not an extreme situation," he said.

The power system was tight not just because of the drought but because of the closure of the New Plymouth station last year. Another factor was the Cook Strait cable, which was not able to run at full capacity.

The South Island was being propped up by power produced in the North Island's gas-fired stations and the emergency diesel-fired station at Whirinaki was running heavily, in effect setting the market price.

Mr Thompson said high wholesale power prices were causing an "important part of our industrial production" to become uneconomic.

The country's largest power user, the Tiwai Point smelter, has already cut its use by 10 per cent.

"Meanwhile, huge windfall profits are delivered to the power generators, mainly owned by the Government," Mr Thompson said.

The shortage came against the backdrop of a short-sighted 10-year ban on new gas-fired baseload power stations, he said.

Power companies have prepared a public power savings campaign, along the lines of one run in 2003 during the last shortage.

If there is no rain in South Island lakes, that campaign may be launched officially in about three weeks.

Meridian Energy this week started its own low-key public power savings campaign, with large newspaper adverts, though a national industry-wide campaign may be started within three weeks, depending on conditions.

Mr Lusk said Meridian was concerned about the lack of rain in South Island hydro lakes.

"But we have a bit more time. Certainly, time to take care around consumption, but now is not the time to panic."