Contact boss’ energy policy plea: ‘Don’t play yesterday’s game’

Tuesday, 23 September 2025

Contact Energy has been investing in new generation at a faster pace than at least some of its rivals in recent years, including at the Te Huka geothermal plant, above.

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Contact Energy chief executive Mike Fuge has made a last-minute plea for the Government not to get too hung up on last year’s energy crunch when deciding how to intervene in the power market.

The Government is expected to announce “surgical interventions” in the electricity market as early as next week.

Energy Minister Simon Watts has indicated its focus is likely to be on trying to avoid a repeat of last year’s winter spike in electricity prices, in the expectation that would also improve electricity affordability more generally.

“One of the challenges in the context of more affordable energy prices is having certainty of supply,” he told The Post last week.

“What we saw last year was a lack of fuel — primarily a lack of coal at Huntly and a lack of gas supply — which was a major contributing factor to the price spikes that we saw over the dry year.

“Some of the considerations under the broader energy review will be thinking about what are the solutions to those problems,” he said.

Fuge said last year’s energy crunch was the result of “a series of unfortunate events”, suggesting the industry had now taken the steps needed to avoid a repeat.

Those events included an infill well at the Kupe gas field coming up dry, a drought reducing hydro inflows, and stockpiles of coal being run down — all of which meant the generators had to rely on burning expensive diesel to keep up with demand, he said.

Since then generators have agreed to jointly fund a coal stockpile at Huntly, applied for the right to raise and lower hydro lake operating levels further, brought on more geothermal energy and started investing more heavily in batteries, he said.

Contact Energy chief executive Mike Fuge says last year’s energy crunch could be put down to “a series of unfortunate events”.

“Rather than playing yesterday's game, we've got to be playing tomorrow's game.”

That meant speeding up investment in “bulk energy” such as solar and wind generation, Fuge said.

“We have to keep building electricity of any form as fast as we can.

“It's not the peaking now, it's not the ‘security’. It's the bulk energy; it's solar, it’s wind, it’s geothermal, whatever we can get done.”

Fuge said Contact was currently being quoted delivery times of 60 weeks for transformers and up to two years for specialised switching equipment that it needed to order from overseas to connect new generation.

That equipment was specific to individual investments, making it more important Contact had confidence projects would be consented, he said.

“If you had an 80% to 90% chance of getting the consent, you would pre-order. But if your chances of getting consent are at best 50%, there's no way in hell.”

John Harbord, chairperson of the Major Electricity Users Group, said he was not convinced electricity security was only a problem of the past.

“I would want someone a bit more independent than the gentailers telling me that,” he said, noting that Contact’s Taranaki Combined Cycle gas power station would not be available from next year.

“The thing that worries me a bit is we've got some massive jumps in demand coming,” he said, pointing to the expected development of a number of large data centres.

Other measures beyond those focused on energy security might be needed to bring the price of electricity down towards the cost of generation, Harbord suggested.

It cost about $13 to produce an extra megawatt-hour of power from hydro generation, but over the past few years hydro power had been sold for about $160/MW, he said.

“Generators put ‘a price on water’ to get a wholesale price that high. They have introduced scarcity pricing through a resource that's effectively free.”