16 Dec 2010

Power companies accused of mismanaging hydro generation

11:37 am on 16 December 2010

Paper producer Norske Skog is accusing hydro power companies of excessively curtailing generation, and forcing up spot power prices to unacceptable levels.

Spot prices were at record lows at the beginning of December, but have increased as generation went down.

Meridian Energy spokesperson Neil Barclay says it has reduced production following warm, dry weather in the Southern Lakes area, to protect the company's generating capacity next winter.

"We've had 10 weeks of relatively low inflows, we've got low snow pack in the mountains and that's leading hydro-generators like Meridian to adopt a relatively prudent approach to generating at the moment," he said.

The drop in generation has led to production cuts at the Tiwai Point aluminium smelter and Norske Skog's Tasman paper mill.

The mill's general manager, Ernie Hacker, says at this time of year, spot prices on average were about $40 a megawatt hour but this week the price has gone as high as $450, a cost he describes as excessive.

And the executive director of the Major Electricity Users' Group, Ralph Matthes says he thinks electricity companies are over-reacting.

The Electricity Authority says it is looking into the steep increases in wholesale electricity prices since the end of November.