ELECTRICITY

Contact responds to Helen Clark

Contact Energy has warned the government not to shoot the bearer of bad news regarding another possible winter power crisis and not to stifle investment in urgently needed new generation plants.

Contact responds to Helen Clark

Company chief executive Steve Barrett said it was wrong for the government to threaten new regulatory intervention as a way to solve the current high spot prices and looming energy crisis. "To blame current market structures for a lack of new fuel resources or a dry summer is to shoot the messenger."

Barrett was responding to Prime Minister Helen Clark's proposals for "significant change" to the electricity market, proposals he believed would threaten further delays to urgently needed construction of new electricity generating plant.

"Contact Energy has resource consents in place for three large, new gas-fired power stations that could be in operation within two years. Until yesterday, we would have been prepared to green-light an investment as soon as we had certainty about gas supplies.

"The Government needs to be very careful that it does not hinder new investment. The threat of new regulatory intervention introduces a substantial source of uncertainty that is likely to deter rather than accelerate investment in new generating capacity. This cannot be the desired outcome, yet it is the most likely commercial response."

A new combined-cycle gas turbine power plant, with the capacity to meet approximately half of Auckland's daily power needs, represented a $400 million investment with a commercial life of more than 30 years, he added, referring to Contact's postponed Otahuhu C station. Contact's other possible stations are a sister project to the TCC plant at Stratford and a new station at Whirinaki, using Westech's East Coast gas.

He said the key issue was how to get new generation built to improve security of supply, but the present lack of new investment had nothing to do with the wholesale electricity market structure and everything to do with the uncertainty about future fuel sources.

Contact had been calling for urgent action to develop the two largest known new gas resources, Pohokura and Kupe, ever since Shell New Zealand's downgrading, in late 2001, of recoverable Maui gas reserves. "If there is any reason for their delayed development, it is the highly concentrated ownership of gas resources and difficulties in the existing regulation of the gas market."

Barrett said a further key impediment to new generation investment was the lack of clarity about the Government's intended carbon tax regime and whether a gas or coal-fired thermal station would be more economically viable.

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