Generators set to share power

By CHRIS DANIELS

More electricity will be available for sale this winter, says Energy Minister Pete Hodgson, thanks to new "reinsurance" deals between the big power companies.

Hodgson announced the new arrangements after meeting representatives of the main power companies in Wellington.

The agreements, apparently to be signed soon, mean power generators will provide electricity at a fixed price to a rival suffering a breakdown.

"The effect of that,on the basis of cross-insurance signed already or about to be signed, is that the hedge capacity has risen from about 90 per cent of total capacity to about 94 per cent,"said Hodgson.

New Zealand's electricity market had now become more liquid, he said, with more power available to be offered to businesses.

Cross-insurance was needed because each of the main generators kept capacity free in case one of its power stations broke down. Because generators were now all competing against each other, each was keeping capacity spare, despite it being unlikely that breakdowns would affect them all.

If a generator's plant broke down, it could mean that commitments to supply electricity could not be met, forcing it to go to the spot market to buy power at high prices.

Contact Energy's corporate affairs general manager, David Hunt, said that while such arrangements had existed in the past, they were becoming much more important.

The events of last winter had made generators pay more attention to the risks faced, and the deals between rival generators were becoming much more sophisticated.

Power prices on the wholesale market increased last month, said market operator M-Co. The jump was attributed to "consistently lower than average rainfall and a 13 per cent increase in national demand" from the month before.

Despite saying that hydro lake storage remained consistently below average during March, M-Co figures showed national storage at 97 per cent of average.

The two largest lakes, Pukaki and Tekapo, which account for 55 per cent of total storage, were 79 per cent and 80 per cent full respectively.

North Island power generators produced 55 per cent of New Zealand's power during the month, and electricity flowed from north to south more frequently towards the end of March.

Under normal conditions, cheap hydro electricity from the South Island is sent across Cook Strait to supply the big population centres of the North Island.

* The average price of 30 minutes of electricity on the wholesale market at South Island's Benmore reference point was up to 4.26c a kilowatt hour, from 3.25c in February. Prices at Otahuhu were up from 3.80c to 4.66c.