John Key says repealing a ban on new thermal generation would help power supply problems. Photo / Brett Phibbs
The Government is taking urgent steps to prevent further rises in electricity prices.
Controversy has raged since Genesis Energy announced plans to raise prices in parts of Auckland by about 9 per cent, citing a range of issues such as excess demand and network constraints.
Prime Minister John
Key said Parliament would this week debate under urgency plans to repeal the ban on thermal energy generation.
He said the Government needed to send "the right signal", which was that it wanted to increase electricity supply and did not support the moratorium on new thermal generation.
The energy bill to be debated this week also intends to repeal the requirement for oil companies to have biofuels at 2.5 per cent of annual sales by 2012.
It is the latest bill to be passed under urgency by the National-led Government. Five were passed last week and a further eight pieces of legislation are to be implemented in National's first 100 days in Government.
Earlier, Mr Key called on Genesis to reconsider the price rises, which it announced after Reserve Bank Governor Alan Bollard urged power companies to show restraint in the current economic climate.
Mr Key later admitted there was "no indication" that there would be any rethink, and Genesis spokesman Richard Gordon declined to comment on the matter.
Mr Key said repealing the ban on new thermal generation - introduced by the Labour-led Government as part of its climate change policies - would help solve problems with the supply of electricity.
"(Genesis's) argument is based around the fact that their costs will be substantially increasing in the 2009 period, in part because of things like the thermal ban, and because the inability to bring new generation on-stream fast enough is driving up the price," said Mr Key. "We need to get on top of the whole issue in relation to energy, security of supply, the stream of new generation that's coming online and our new generation system."
Mr Gordon said repealing the thermal ban gave the country's five big power generators more certainty to plan new projects.
"It gives us more clarity and potentially helps solve some of those supply issues, but it depends on who builds what and when," he said.
"The five big generators have various development plans at different points in the process."
But energy expert Bryan Lleyland, of the Climate Science Coalition, said repealing the ban would help remove the perception that future price rises were inevitable, and encourage companies currently exploring for oil to look at gas.
However, he said the reason prices were going up was not energy supply but the structure of the industry.
"The way the market is structured now rewards generators for keeping us on the edge of a shortage," said Mr Lleyland.
"There needs to be a thorough and objective review of the electricity market. By hitting generators over the head you're only treating the symptom, not the disease."
Energy Minister Gerry Brownlee told the Herald recent price rises were "unacceptable" and would not continue. Reports from the Commerce Commission and Electricity Commission would include some comment on the structure of the market.
"The problem with the price of electricity is that we've had some years of an energy strategy that hasn't focused on the fact that demand is growing at a greater rate than supply," said Mr Brownlee.
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