15 Aug 2009

Report reveals uneconomic old power plants

10:08 pm on 15 August 2009

Part of an electricity report presented to the Government on Wednesday shows many older power plants have never been economic.

The news comes in appendices to the report led by economist Brent Layton.

It says the cost of raw electricity, at eight cents a kilowatt hour, makes up just over a third of an average power bill.

But few older power stations could produce electricity for anything near that sum.

The worst offenders are the Clyde Dam and the Tongariro power scheme, which would have to sell electricity at more than 20 cents a kilowatt hour to break even.

Adding transmission and other costs, that would push an average power bill past 35 cents a kilowatt hour.

Warning from Energy Minister

The main body of the report contained strong criticism of power companies and found faults with the electricity system, such as steep price rises and frequent power supply crises.

One suggested remedy is to split up and reconfigure two state power companies, Genesis Energy and Meridian.

The companies have not commented but are expected to do so in counter submissions.

Energy Minister Gerry Brownlee says profits by power companies are far too high and the state owned companies will have to present a very good case to avoid reforms.

He told Morning Report he hopes the state owned companies do not spent customers' money arguing against any reforms.

Mr Brownlee says the reforms suggested are straightforward and it would be silly of the companies to fight a corner they could not justify.

The report also suggests the abolition of the Electricity Commission as the industry regulator and strengthening the hand of the Commerce Commission.

Bills may not come down

Former Meridian Energy chief executive says he has doubts that the proposed reforms will lead to lower power bills.

Keith Turner says he welcomes many aspects of the review, but he says a suggested $10 rebate for customers who are ordered to save power during dry years would be hard to implement.

Dr Turner says up to $3 billion will have to be spent to remedy underinvestment in the national power grid over the coming years.