Power bills could jump more than $300 a year

BY JAMES WEIR

Electricity bills could jump more than $300 a year if gas prices move into line with international liquefied natural gas prices over time, says energy analyst Molly Melhuish.

"Already, a quarter of householders cannot afford to keep their houses warm even before income losses caused by the recession," said Ms Melhuish, an analyst at the Domestic Energy Users Network.

If New Zealand was forced to import liquefied natural gas for power stations, the present gas price would about double and the price for electricity would jump about 4 cents a kilowatt hour, she estimated.

An Electricity Commission report last week forecast much higher gas prices if the fuel was imported in LNG form to be used in gas-fired power stations.

Domestic gas prices would also rise significantly if there was a big gas discovery which allowed exports of LNG at world prices.

There would only be a "domestic" price for gas if just enough for New Zealand was found, which Ms Melhuish said was unlikely.

The potential rise in power prices was similar to the effect seen in milk and cheese prices when international dairy product prices went "through the roof "two years ago, she said.

The average monthly power bill would rise from about $150 to $177 a month.

In less than a decade, electricity prices have risen more than 70 per cent, more than twice the rate of inflation.

Ms Melhuish said the Government could avoid another leap of about 4c a unit, or $27 a month, if it forced gas producers to sell a certain amount to the local market at a lower "domestic" price, for use in power stations or home heating.

That had been done in Western Australia. The alternative was to significantly improve energy efficiency in homes and business.

That could slow the growth in electricity demand from 1.4 per cent to 0.8 per cent a year, and reduce the need for new, dearer, power stations, Ms Melhuish said.

A 4c-a-unit rise in electricity prices assumes gas would be imported for use in power stations by 2020.

But power firms would probably build cheaper hydro stations and wind farms first, instead of using expensive gas, so generators could start lifting prices soon, she said.

With a recession and a recent fall in power demand, there was no hurry to build new stations or raise prices.

If imported LNG gas became too expensive, some big gas-fired stations would have to shut down once their supply contracts ran out.

There would not be enough reasonably cheap hydro and wind power to fill the gap, Ms Melhuish said. The country would end up having to use coal instead, unless there was a massive energy-efficiency programme.

Gas could be exported with a find of as little as 1000 petajoules much smaller than the original size of the offshore Maui gas field.

The Electricity Commission report showed the price for gas rose from $4 a gigajoule in 2004 to $6.20 a GJ in 2007.

But power generation would become uneconomic against other forms of power if the gas price was above $13 a GJ. Under most scenarios presented in the commission's report, gas would rise to at least $19 a GJ by 2025.

Only one scenario sees New Zealand avoiding linking its international gas price to the world price, but that was "extremely unlikely", Ms Melhuish said.

It meant finding exactly the right amount for New Zealand's needs.

- © Fairfax NZ News