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Seriousness of lake storage levels


Wednesday, 4th June 2008

Media release by the Major Electricity Users’ Group (MEUG)

Highest ever prices confirm seriousness of lake storage levels

“Electricity spot prices over May were the highest ever recorded reinforcing the need for all consumers to take prudent steps to conserve power now or risk blackouts in the future along with significant increases in future retail prices. We also need to review policies such as the ban on new thermal generation”, said Ralph Matthes, Executive Director of the Major Electricity Users’ Group (MEUG).

“At Haywards the spot price over May averaged 27.2 c/kWh . The previous highest average monthly spot prices were also associated with hydro storage “crisis” in June and July 2001, March to May 2003 and November 2005 to April 2006. Ranked in order of the previous highest average months those were 23.7 c/kWh in July 2001, 20.4 c/kWh in April 2003, 16.6 c/kWh in June 2001 and 16.1 c/kWh in March 2006. The record high spot prices for May 2008 are an indicator that the market considers we are in a riskier situation than in any prior crisis.

“It is essential all consumers take prudent steps to save power now to avoid black-outs later. This needs to be the prime focus of everybody.

“Electricity suppliers are already on record as saying costs they incur as a result of higher wholesale prices this winter will feed into retail price rises later in the year. Saving power now to minimise the impact on future retail prices is another good reason why households need to take action now.

“A secondary but important action is to recognise key policies that might need fixing or proposed policies that should be reconsidered. It’s no coincidence that all prior “crisis” were due to concerns on hydro storage and inflows. New Zealand should be rightly proud of having one of the highest proportions of renewable generation in the world but it has come at a high cost over the last 7 years with 4 hydro storage related crisis. We need a mix of new generation sources to balance out the risks associated with renewable generation such as hydro and wind.

“If there is a single lesson we should learn from the current problems in the electricity market it should be that we need the right amount of and the right mix of new generation. Any ban on new base load thermal generation will undermine future security of supply and increase power prices,” concluded Mr Matthes.


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