Contact throws down power price gauntlet

By Nick Stride

Friday 20th February 2004

Contact Energy, the country's largest power company, this week launched itself on a collision course with the government over electricity pricing and energy strategy.

Contact chairman Phil Pryke threw down a gauntlet to Energy Minister Pete Hodgsonwhen he told the company's annual meeting power prices would have to rise "significantly" over the next few years.

Mr Hodgson said only last month that "significant" further rises would take power prices higher than they needed to be to fund necessary new generation.

Mr Pryke told the meeting about $5 billion would have to be invested in new fuel and generation over the next eight years.

But that would require trade-offs between prices, environmental impacts, and reliability of supply.

"Anyone who suggests they can deliver that trifecta of low prices, clean energy, and reliable supply is either lying or dreaming.

"Frankly, I can only think of [them] as snake oil salesmen."

Chief executive Steve Barrett was equally blunt, saying the country faced potential power shortages in three to five years as the Maui gas field ran out.

Contact needed to decide in the next 12 to 18 months how it would spend hundreds of millions of dollars on new generation, he said.

But question marks over the powers of the new Electricity Commission, over the government's new carbon tax and over the capacity of the Resource Management Act to allow timely development of new generation and fuel supplies were adding uncertainty to an industry already concerned about where those fuel supplies were going to come from.

Contact has resource consents for two new gas-fired plants which would cost around $500 million but as things stand there will be no gas with which to fire them.

It is investigating plants fuelled by coal or by imported LNG (liquid natural gas).

But, Mr Barrett said, it would take several years to gain consents for an LNG facility and five or six years to build one.

"To make these decisions the electricity industry needs some answers from the government soon."

Mr Hodgson's press secretary, Graeme Speden, did not respond to a request for comment from the minister.

Contact on Tuesday announced a 49% higher $27.5 million December first quarter profit.

Analysts attributed the rise to the acquisition of the Taranaki Combined Cycle power station, higher power prices, and an expanded retail electricity customer base.

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