Wednesday, 25 July 2001

Media Statement - Hon P Hodgson

Stocktake on electricity situation

Energy Minister Pete Hodgson will hold discussions with the electricity industry and consumer representatives on Friday.

Mr Hodgson said that the hydro storage situation has worsened slightly over the past week and it is time to take stock of the options for managing the situation.

We are nowhere near the situation we faced in 1992 but it is prudent to keep ahead of developments, as there is the potential for lake levels to worsen considerably over the next month or so.

In addition a growing number of businesses are feeling the pinch. While it is true that these same businesses have enjoyed low spot prices for three years and thereby gained considerable advantage, it is also true that many had understandably not predicted that spot prices would rise to the level they have in times of shortage.

The market system introduced by Max Bradford in April 1999 has just struck its first dry winter. As a result many businesses who are exposed to the spot market are learning for the first time how volatile the spot price is. Some are in considerable difficulty.

Mr Hodgson said that options for the near future include a publicity campaign, the greater use of consumer buy back mechanisms such as Mercury have begun or bringing on various diesel generators around the country.

Some of these options are costly so we need to carefully judge when to incur those costs. If we move too soon it will cost money needlessly. If we move too late it will increase the risk of a crisis. It is an issue of prudent risk management."

ENDS

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