N.Z. Power Prices Jump on Cold Weather, Line Work

By Gavin Evans

Oct. 21 (Bloomberg) -- New Zealand power prices jumped after a cold snap increased demand at a time when supplies were reduced by maintenance on electricity transmission cables linking the country's North and South Islands.

Power in Auckland, the biggest city and home to Contact Energy Ltd.'s Otahuhu generator, jumped to NZ$1,041 ($648) a megawatt-hour at 8 a.m. local time, from NZ$43 the same time yesterday. It cost NZ$54 at 12 p.m.

The power link that usually brings energy to the North Island from dams on the South Island is shut for four days of maintenance. Cold weather also increased demand at a time when Genesis Power Ltd. idled half of its 1,000-megawatt coal-fired Huntly power station during what is typically a period of relatively low electricity use.

``Demand was up higher than forecast this morning'' and the Huntly units take a day to start from cold, Genesis spokesman Richard Gordon said. Output from the company's dams and a 48- megawatt gas unit were increased to help meet the demand peak, he said.

New Zealand households are supplied under fixed-price tariffs that shield them from fluctuations in the wholesale power market. Heavy industry, including the nation's paper makers and smelter operators, buy much of their energy at wholesale prices.

Temperatures in Auckland, Northland and through the central North Island were cooler than usual this morning, according to government-owned forecaster Metservice Ltd.

Power demand was more than forecast today, though not substantially so, said Rebecca Wilson, spokeswoman for grid operator Transpower New Zealand Ltd. Generators are being regularly alerted to reserve needs in the market and have capacity to offer more power if they choose to, she said.

While the industry has a market for emergency, instantaneous reserve, it lacks a mechanism to pay thermal generators for keeping units ``warm'' and on standby to meet swings in demand, Genesis Power's Gordon said.

Power at Benmore on the South Island cost NZ$105 a megawatt- hour at 12 p.m. from NZ$75 the same time yesterday.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net.