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Wholesale power prices doubled in June

By Phil Boeyen, ShareChat Business News Editor

Tuesday 10th July 2001

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Electricity market operator M-co has confirmed what companies like Natural Gas (NZSE: NCH) and Trustpower (NZSE: TPW) already knew - power prices in June took a huge leap.

M-co says average wholesale electricity prices climbed markedly in June, reflecting continued high demand and prolonged periods of below average rainfall into the country's main hydro lakes.

Demand for electricity last month was around 4.7% higher than this time last year and around 4.8% higher on average than in May.

M-co says while national hydro storage levels increased during June, this was predominantly due to the conservation of water in the main hydro lakes rather than their replenishment through high rainfall.

At the end of the month national storage was at 1,970 gigawatt hours, 77% of the average for that time of year, with South Island storage at 85% of average.

During the month the average South Island price more than doubled to 16.97 cents per kilowatt hour, up from 7.45 cents in May. In the lower North Island the price rose to 16.61 cents, up from 7.55 cents in May, while in the upper North Island prices rose to 14.9 cents from 7.39 cents in April.

One brighter spot for the South Island is that the capacity of the transmission lines transporting electricity down to the Wellington region was increased in mid-June, allowing more electricity to flow through and helping to lower wholesale prices toward the end of the month.

Both TrustPower and Natural Gas have sounded profit warnings over the high cost of wholesale power this winter, which has forced NGC to sell its Christchurch customer base to Meridian.

However Contact Energy (NZSE: CEN), which is a net generator of power, has been attracting renewed buying interest from investors in recent days, pushing the company's stock above its $3.10 issue price.

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