Faults spark volatile prices

Faulty generation gear, low North Island lake levels and transmission constraints have resulted in tight power supplies and volatile wholesale prices.

Supply problems have coincided with an autumn cold snap, pushing demand up sharply.

Customers on the spot market have seen prices swing markedly in the past fortnight and the differential between the North and South Islands has grown as a surplus of water in southern hydro lakes has meant rock bottom prices in that part of the country.

At times over a two-day period 10 days ago electricity generated in the South Island was being sold for next to nothing, when the breakdown of the HVDC link prevented any power being moved to the North Island.

Yesterday power prices were up to 25 times as high in the north than they were in the south.

Contact Energy's 367MW combined cycle plant in Taranaki has been out of action for over a week due to a maintenance shutdown while at Huntly, Genesis Energy has suffered a breakdown to one of its four 250MW generators.

The ageing unit has been out for a fortnight but should be back on before the end of the week.

Lake levels at Genesis' Lake Waikaremoana power scheme are low as a result of the East Coast drought and Mighty River Power says it is closely watching levels at Lake Taupo which are also low.

The country's standby diesel generator at Whirinaki in the Hawkes Bay has been cranked up several times in the past 10 days and Transpower's Pole One - the old, fragile interisland link which is used as backup - was last night pressed into service for the second time in a week.

Kieran Devine, the general manager of systems operations at Transpower, said transmission problems had been exacerbated by some maintenance work which had been deferred from last year.

"We're reasonably tight covering the peaks with the cold snap going through and being at the end of the maintenance season things are a lot tighter than we would like."

The cold weather had also worsened the equation.

"Psychologically with the first cold snap, everyone turns their heaters on and when the power bills come they turn them off."

A winter industry group was about to sign off on an agreed forecast demand during the peaks over June and July.

"We're almost in a similar position to last year. If we go into the peak with the loss of the largest unit we can get through but probably at the cost of reducing some of the reserves. If we lose two of them we're in trouble - that situation hasn't changed for about 10 years," Devine said.