Blackout spectre haunts Govt

New Zealand is just weeks away from a Government-backed electricity savings campaign, with forecasters holding little hope of much rain in southern hydro catchments this winter.

The National Institute of Water and Atmospheric Research (Niwa) said yesterday that below-normal rainfall was likely in the central South Island at least until the end of July.

Yesterday, South Island spot prices rocketed to more than five times their average values, reaching between 40c and 50c a kWh in the afternoon, levels unseen since April 2003.

A major announcement on the developing crisis is expected this morning from the National Winter Group, led by Transpower chief executive Patrick Strange.

Group members held a phone conference on Tuesday night. While it is understood a public savings campaign is unlikely to be unveiled today , the statement is expected to reflect the growing threat of winter power shortages.

Electricity Commission chairman David Caygill said a campaign could be needed in the next "few weeks".

"The reason you don't launch into a public campaign is because experience suggests a campaign like that is hard to sustain for weeks on end. We don't today face a crisis, to use an overworked word. We do face the potential of a difficult situation. We might need to put something like that in place in a few weeks time if the situation doesn't improve," Caygill said.

Observers say any call for savings would be embarrassing for the Government in the lead-up to an election.

Auckland power consultant Bryan Leyland said the problem was not going to go away for the Government. Winter blackouts were a real possibility.

"They will be terrified by now. If Niwa is right, then we are in full emergency mode."

Energy Minister David Parker, in the Chatham Islands yesterday, could not be reached for comment.

A spokeswoman said generators would know why spot prices were high, "but you would expect it to be linked to the low hydro-lake levels".

Niwa principal climate scientist Jim Salinger said the outlook for the next few months was grim.

"It doesn't look good at all. We are expecting normal to below-normal precipitation in that area and more snow and that gets locked up. It's not going to do a lot for the southern lakes."

Major Electricity Users Group executive director Ralph Matthes said the extreme spot prices were affecting industry.

"It means that people who are on spot (prices) and have orders to fill are really going to be hurting and reinforces the need for some prudent savings. There will be a financial cost. It is a difficult situation, and as for households, they don't see the full price yet but they don't get the idea this is quite serious, but it will get them in spring or summer when the retailers increase their prices."

Leyland said if high spot prices continued, job losses would be inevitable as manufacturers lost orders and cut back.

"Everything possible should be done to keep thermal power stations running flat out to conserve what water there is in the South Island lakes. That's the top priority."

Meridian Energy spokesman Alan Seay said the escalation of spot prices yesterday was due to the higher value the company was putting on its water and reflected storage.

"Under the laws we have to act commercially but we are having to act with a view to make the best use of the water we've got," he said.

- © Fairfax NZ News