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New Zealand faces dramatic electricy price rises

Dramatic electricity price rises are on the horizon for homes and businesses this year.

Three of the country's four major electricity retailers are anticipating higher-than-usual price increases as a result of rising wholesale electricity costs.

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Mills shut again by power bill

Two big North Island pulp mills halted production yesterday for the second time in four days in response to soaring electricity prices. Mill management pulled the plug on power-thirsty pulp driers as they faced a tenfold increase in their costs - although prices fell yesterday as disrupted supply was restored. Prices soared on the spot electricity market because of disruption to key transmission lines from the South Island dams and higher demand with people returning from the holidays. Thermal stations in the North Island compensated by producing more power than usual for this time. The impact on wholesale electricity prices was a rise from $50 a megawatt-hour to $1000 MW/h yesterday and $800 MW/h on Friday morning when wind toppled three pylons at remote Molesworth Station in Marlborough. Prices returned to normal at 5pm when Transpower said it had restored the high-voltage link after days of work to erect temporary towers.

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Power price surges spark row

Fresh debate over possible flaws in the wholesale electricity market has broken out after huge price surges followed a cut in the power line connecting the North and South Islands. High winds blew down three 40m pylons about 60km north of Hanmer Springs on Friday morning, effectively dividing the wholesale electricity market in two. Prices in the upper North Island soared yesterday from less than 10c a kilowatt hour to 108c a kilowatt hour. Once the North-South link was restored yesterday afternoon, indicative prices fell rapidly. At 5.10 pm, prices at Haywards, near Wellington, were 102.3c a kilowatt hour. Just 10 minutes later, once the link was restored, prices fell to 4.1c a kilowatt hour. Big North Island power users, particularly pulp and paper makers, were forced to cut production after the pylons were knocked down, since wholesale prices became too expensive. Market operator M-Co says the market worked just fine, with price signals sending the message that cheap power was no longer available to big North Island electricity users. These users, however, say that price volatility over the past few days indicates an unstable market. The chairman of the Major Electricity Users Group (MEUG), Terrence Currie, said someone needed to work out whether this volatility was because inherent flaws in the market, or the behaviour of the big power generators. "It is completely unrealistic to expect end users, or for that matter prospective new entrant generators or retailers, to operate in such an unstable wholesale market," he said.

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