Storage lakes brimming but prices set to rise

By CHRIS DANIELS energy writer

Rain is falling and lakes are rising, but then so are power prices.

Meridian, which generates 30 per cent of New Zealand's electricity production, has confirmed that recent rainfall has lifted its hydro lake levels to nearly normal.

Meridian operates two huge storage lakes in the South Island, Pukaki and Tekapo, which account for 55 per cent of total national storage. These were 45 per cent and 65 per cent full respectively last week.

Company spokesman Alan Seay said the company's eight hydro stations on its South Island Waitaki system were now running flat out, making use of the water inflows.

M-Co, the company that runs the national wholesale electricity market, released figures yesterday showing that storage for the whole nation was at 2892 GWh, or 103 per cent of the average for this time of the year.

South Island storage was 2318 GWh, which is 100 per cent of average for this time of year.

But rain falling in the Southern Alps does not mean pressures on homeowners have eased, with the announcement last week that Mercury Energy - which provides power to 220,000 homes in Auckland, Manukau and parts of Papakura - is lifting its residential electricity prices 7 per cent, meaning a jump of $8.40 on a $120 bill.

Many in the industry say cut-throat competition between the big four power companies - three of which are state-owned - meant low electricity contracts were being offered that did not factor in the risk of a dry period, such as that seen over winter.

Price rises are now needed to take this into account. Both Meridian and Mighty River Power, which owns Mercury, say they lost money having to buy electricity on the spot market to supply their customers over winter.

Mighty River Power operates dams in the North Island, where lakes usually fill up in winter, unlike the South Island, where spring is the best time for water.

But welcome rain has still been falling for Mighty River, with Lake Taupo, which during the winter got down to only 7 per cent of its operating level, measured at 77 per cent full on the weekend.

The latest water-flow figures show how quickly our national hydro storage can change after heavy rain. In just two weeks, from November 25 to December 9, national hydro storage jumped from 68 per cent of average to 103 per cent.

Many other countries are able to store enough water to keep their hydro power stations going for years. New Zealand's small lakes can run dry in eight weeks if there is not enough water flowing into them.

The situation has been likened to running a bath full of water with the plug taken out - without good flows of water coming out of the tap, the bath soon runs dry.

A lack of water flowing into the lakes was a major cause of the spike in wholesale electricity prices over winter. The year started well, with above average storage levels, but power companies had to cut hydro-generation when inflows dropped.