Major electricity consumers are being told to prepare for significant price rises as dry weather causes South Island hydro lake levels to drop drastically and wholesale power prices to shoot skyward.
Sparse spring rainfall has seen Central South Island hydro lakes fall to their lowest December levels in 15 years, reduced river flows in many places and led to parched farmland.
Hydro storage lakes were only half as full as this time last year, TrustPower community relations manager Graeme Purches said yesterday.
Wholesale power prices rose 30 per cent to $62 a megawatt hour in the past week and Mr Purches believed prices could soar as high as $200 kW/h if hydro lakes continued to empty.
Businesses and large industrial companies buying electricity on the spot market - where prices change every half hour - would be the first to feel the pinch.
There would not be any immediate impact on residential electricity consumers because they purchased power on the contract market, which changed annually.
Mr Purches said demand for electricity had increased in the South because of the growing number of dairy farms and irrigation units.
Power companies were trying to conserve hydro lake levels by curtailing generation and importing power from the North Island.
"The Cook Strait power cable has been extremely busy carrying power south ... since the start of November. It's very unusual for this time of year," Mr Purches said.
Dr Jim Salinger, principal scientist with the National Institute of Water and Atmospheric Research, said yesterday that farmers should prepare for a "tough drought".
"We're in the first decent La Nina for a while. It's arrived," he told the Otago Daily Times from Queenstown, where he spoke at a climate change seminar.
While a hot La Nina summer was ideal for sun-seekers, it could have a drastic effect on farmers, Dr Salinger said. Soil moisture was already at mid-summer levels, "which means there isn't any".
Water restrictions have been imposed in the Central Otago and Clutha districts.