Finance Minister seeks urgent briefing as power prices spike

Tuesday, 6 August 2024

Finance Minister Nicola Willis has asked for an urgent briefing from the Treasury as wholesale electricity prices spike above $800 a megawatt-hour, or about three times the price consumers pay for power.

Willis said she had asked Treasury to explain “why they think we are seeing this spike in electricity prices and what interventions are available to us to help” and expected its response within the coming days.

She is already pointing the finger at tumbling gas production.

“It's obvious that the complete lack of gas is impacting the electricity market and other markets,” she said.

Resources Minister Shane Jones told Parliament that the latest figures showed gas production was “20% down”.

The Ministry of Business, Innovation and Employment forecast last month that gas supply would fall about 7% short of recent demand during the next three years and that the volume of proven and probable gas reserves had fallen by 20% over a year.

Canadian-owned methanol manufacturer and exporter Methanex has historically been the country’s largest user of gas, accounting for about 45% of total consumption.

But it reported last week that it had cut methanol production to 178,000 tonnes, or about 41% of capacity, during the three months to the end of June, because of the gas shortage.

The company’s global chief executive, Rich Sumner, said some of the gas it was contracted to receive was “redirected” for use in the broader energy sector. Tt is currently awaiting arbitration on a dispute with Todd-owned Nova Gas.

Electricity generators are understood to have begun investigating options for importing liquefied natural gas (LNG) from overseas to ensure they can continue to source gas for their power plants.

ACT Party energy spokesperson Simon Court called on Tuesday for a “cross party accord” on natural gas, saying it was alarmed by spiking wholesale energy prices.

However, he made clear that the outcome he was seeking was “Labour and the Greens coming to the table so we can form a cross-party stance that tells the world it’s safe to invest in natural gas in New Zealand”, rather than a broader discussion.

The Government’s plan to reverse the former government’s ban on new offshore oil and gas exploration permits might not be sufficient to entice explorers back to the country, given the projects could be “scuppered by a future Labour Greens government”, he said.

Opposition energy spokesperson Megan Woods was dismissive.

“There is not a single exploration permit that could be issued that would make a blind bit of difference to supply at the moment,” she said.

“There hasn't been a commercial find offshore since 2004 and it is time that all the three parties of this government face up to the fact that we have to plan for a future without fossil gas.”

Woods said Labour would be open to a formal invitation from the Government for cross party talks on energy policy, but the party would have some bottom lines.

“Restarting oil and gas exploration is not something that I can imagine us agreeing to.

“Issuing a genuine invitation, rather than a press release, would be a good start to constructive steps,” she said.