Blackout fear as ECNZ split

By Bernard Orsman

Industry experts who worked on the split of the Electricity Corporation concede it will mean greater risk of power blackouts and more environmental damage.

The Government announced yesterday that it had given the final blessing to the April 1 split, which is subject to further talks with Maori.

The Electricity Reform Transition Unit, which advised the Government on the split's viability, expressed concerns about the ability of the "baby ECNZs" to keep the lights on.

The new state enterprises would be less able to manage security-of-supply risks "because they have smaller and less-diverse generation portfolios," the unit said.

It noted that an overcapacity of generation would exist for several years and that would help the situation.

The minister responsible for energy issues, Max Bradford, said he was confident the commercial disciplines of the market would actually enhance security of supply.

The split would bring real competition to the wholesale end of the market which would flow on to lower power prices for consumers.

From next April, ECNZ will be split into three state-owned enterprises - Waikato Ltd (based on the Waikato River hydro system), Genesis Power (Huntly thermal and Tongariro and Waikaremoana hydro systems) and Hydro Energy Ltd (the South Island's Waitaki hydro system and Manapouri hydro).

The fourth state-owned generator, Contact, which owns eight power stations and accounts for a quarter of electricity production, is being privatised.

Pollution is also tipped to rise from fierce competition between the "baby ECNZs" that will see thermal power stations burning gas while hydro stations spill water as their dams overflow.

The Alliance leader, Jim Anderton, said the split would ultimately lead to privatisation of ECNZ in bite-size pieces, a loss of value to taxpayers of $1 billion and more overseas control of strategic assets.

The Labour energy spokesman, Pete Hodgson, said the split was "cavalier lunacy" that destroyed the integrated hydrothermal power supply and could lead to serious blackouts.

Mr Bradford said that because power companies faced stronger commercial disciplines there would be less chance of the lights going out in a dry year.

The majority of market participants (wholesale buyers and sellers) had agreed to accept responsibility for supply risks.

An industry spokesman said the security-of-supply issue was just about unanimously accepted but participants still believed that the Government could intervene to help in the event of a blackout.

A spokesman for the Royal Forest and Bird Protection Society, Barry Weeber, said the problem would not be solved until there was a carbon charge on greenhouse gas emissions.