Power price spike probed

The Electricity Authority is investigating August prices, writes Tim Hunter.

A shutdown of Contact Energy’s two big thermal power stations is being blamed for a huge spike in electricity wholesale prices two weeks ago.

The Electricity Authority is investigating why the average price in Auckland hit $695 a megawatt-hour on August 19 compared with the four-week average of $74.

A spokesman said the authority was probing the conduct of generators ‘‘in terms of the plant made available for dispatch, their offer structure and revisions to offers’’.

A Transpower spokeswoman said the August 19 spike had been unusual.

‘‘Some North Island thermal generation was not offered and there was also little wind generation [because of the calm weather],’’ she said.

Despite a strong flow of power from the South Island, ‘‘the total generation available still wasn’t enough to meet both full reserves and load at peak time [about 5.30pm to 7pm]’’. Contact Energy confirmed that neither of its gas-fired combined cycle plants at Taranaki and Otahuhu were offered into the market.

‘‘High inflows into hydro catchments meant Contact had not run a combined cycle plant since August 1,’’ a spokeswoman said.

The company had run its emergency diesel plant at Whirinaki that day, but problems starting it contributed to the tight supplies.

Contact’s last operational report showed North Island hydro storage at 73 per cent of average on August 18, while South Island hydro was at 142 per cent of average. A market source, who asked not to be named, said Contact’s strategy was surprising.

‘‘It’s odd they were not burning gas yet were prepared to burn diesel. They’ve had Taranaki out for quite a while which is questionable in the middle of winter.’’

Contact published a statement to the NZX in March correcting a broker’s statement that its combined cycle plant at Taranaki would not run over winter because it needed a substantial upgrade.

The company said the problem with the plant had been resolved during an outage ending on March 5.

‘‘The TCC plant is not limited by operational hours this winter and will continue to be run based on prevailing market conditions,’’ it said.

The wholesale-price spike, the highest in four years, occurred a day after the public launch of new electricity retailer Flick, which gives domestic users access to wholesale market prices.

Flick chief executive Steve O’Connor said the situation had been very unusual, ‘‘and relatively unusual behaviour in the market too’’.

The first warnings went out to the market about 12.55pm on August 19, he said. ‘‘We saw the Transpower alerts saying there was insufficient generation and the generators for whatever reason didn’t manage to meet that forecast demand,’’ O’Connor said.

Because of the event’s rarity, Flick had decided not to charge customers for the period of the price spike, he said. The company’s analysis of prices over the last 14 years showed the impact of price spikes on customers would have been small. ‘‘In our proposition, of more interest to customers is chasing the good prices than worrying about the very occasional bad price which is often outside peak periods.’’