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Report: electricity supplies unlikely to be at risk

Friday, 16th December 2005 For Immediate release

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

Commission report confirms electricity supplies unlikely to be at risk

“Notwithstanding the current low lake levels, they are unlikely to impact on next years supply of electricity” said the Chair of the Major Electricity Users’ Group (MEUG) Terrence Currie, commenting on the just released report by the Electricity Commission, “2007 Reserve Energy Needs Assessment (1),” that covers 2006 through to 2009.

“The Commission has forecast that there will be adequate generation to meet New Zealand’s requirements in 2006 and 2007. This certainly focuses attention on why current spot prices are so high. The Electricity Commission is mandated to obtain additional supplies of reserve energy if it believes that shortages are likely. It has concluded that no additional reserves are required and yet the five main generators are offering their electricity into the spot market at prices reminiscent of the 2001 and 2003 electricity crises.”

“It is therefore extremely timely that the Commerce Commission is carrying out an investigation under Part II of the Commerce Act into whether suppliers are abusing their market power (2). The recent announcement by the Electricity Commission that next year it will conduct a review of the electricity market is also appropriate. Today’s high prices appear to reflect either market structure, market design or market rule defects and these should be uncovered by the investigation and/or review.”

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“Industry recognises that the outcomes will not be known until well into next year. By that time many large consumers affected by spot prices and new hedge contracts offers will have either reduced production or accepted those higher prices even though they may include an “abuse of market power” margin.”
“Households and commercial customers will feel the effect of current extremely high spot prices next year as retail electricity prices increase. It is therefore in the interests of all consumers to use power wisely right now, reducing demand, thereby lowering current spot prices.”

“MEUG repeat the call we made earlier this month(3) that, “… we believe it is in the interest of the economy as a whole that all electricity customers and households use electricity wisely and if possible make any quick and easy conservation savings,” concluded Mr Currie.

1 Refer http://www.electricitycommission.govt.nz/consultation/2007reserveenergy/view

2 This was raised in MEUG media release, Investigation into electricity market welcome, 25 November 2005

3 Refer MEUG media release, Electricity consumers can protect their own interests, 8 December 2005


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