Hydro lakes rise but industry still cautious

Concerns about electricity supply during winter remain despite recent rainfall raising hydro lake levels.

Electricity market administrator M-co said storage in the country's hydro lakes had risen throughout this month and was today at 83 per cent of average for this time of year.

Hydro generation provides between 60 and 70 per cent of the country's electricity.

M-co figures show that at the start of April hydro lake levels were at 65 per cent, similar to those at the same time in 1992 when the country last faced a major power shortage.

But in 1992 water storage fell away sharply during April and May, in contrast to this month where inflows were above average on 11 days up to Sunday, peaking that day at 279 per cent of average.

Rising lake levels have been reflected in prices which have shown a general downward trend from a high around 24c per kilowatt hour five weeks ago.

On Sunday, the price at the Haywards North Island reference point in the Hutt Valley was 13.05c, down from 18.97c a month earlier, but still well above the figure of 7.15c a year before.

The M-co electricity price index, a seven-day rolling average, was at 12.70 from 20.65 a month earlier and 6.64 a year ago.

Alan Seay, spokesman for state owned electricity generator Meridian Energy, remained cautious despite the rising lake levels.

"It's looking a lot healthier than it has been for a while, but I would certainly not characterise us as being out of the woods yet," he told NZPA.

In the South Island, which produces most of the country's hydro electricity, hydro lakes were 55 per cent full, at 71 per cent of average for the time of year.

North Island hydro lakes were 72 per cent full, taking them to 189 per cent of average.

Heavy rain in parts of Otago today had largely missed the Waitaki catchment, which provided about a quarter of the country's power, Mr Seay said.

"We've had some, it's alleviated our concerns slightly, it's brought us a little bit of time, but it's made little material difference to the situation in the Waitaki catchment."

The recent price easing and rising lake levels have not been enough for aluminium producer Comalco to return to normal output levels.

Ten per cent of the electricity for the company's Tiwai Pt smelter is bought on the spot market, and Comalco says it has built up to a 10 per cent reduction in electricity use since February.

"Comalco remains concerned about the security of electricity supply throughout the winter and expects to maintain reduced energy use until lake levels improve substantially," a company spokesperson said.

Ninety per cent of the electricity used at the smelter is bought through a take or pay contract with an escalator linked to the spot market.

Hitesh Patel, managing director of EnergyPro Solutions, which helps clients manage energy expenditure, said New Zealand electricity prices were heavily dependent on rain and latest falls had eased concerns.

"Things are a little bit easier, but I don't think the crisis has gone away," he said.

Businesses paying spot prices for electricity were facing budget blow-outs.

Those on fixed price contracts were not feeling effects of the rise until their contracts were up when present spot prices influenced new contracts, Mr Patel said.

As a result their budgets, too were being blown out.

"People have budgeted $25,000 to $30,000 and they're signing off bills of $65,000."

He expected electricity prices to remain high as producers preserved hydro lake levels, until levels returned to normal.

- NZPA