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High demand for electricity during January

Unseasonably high demand for electricity during January

Average wholesale electricity prices remained high during January, a month when prices are typically low due to reduced demand.

The national average daily energy demand for the month was approximately 7% higher than in January 2002. Climate has a major influence on demand. In January 2003, temperatures were below average in many areas and the national average temperature of 16.4°C was 0.6°C less than the 1961-90 normal (source: NIWA). Demand is also directly linked with GDP growth, therefore some of the year-on-year growth in demand will be directly related to the growing domestic economy

In addition to increased demand, other factors contributed to the upward pressure on prices during January. For most of the month inflows into key hydro catchments were below average, prompting some hydro generators to conserve water at times. Also, maintenance continued at Otahuhu B (Contact Energy's 380 megawatt combined cycle gas turbine station) throughout the majority of January. Otahuhu B began generating again on January 29.

The average half-hour wholesale electricity price for the South Island reference point, Benmore, increased to 4.52 c/kWh in January, up from 3.65 c/kWh the previous month. Haywards, the North Island reference point, recorded 5.55 c/kWh, a steady increase from 4.94 c/kWh in December. Otahuhu, often used as an indicator of upper North Island prices, also increased to 6.61 c/kWh from 6.12 c/kWh in December.

Low inflows combined with the unseasonably high demand levels contributed to a decline in hyrdo storage levels during January. At month's end, national storage was 82% of average for this time of year, down from 92% of the average at the end of December 2002.

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