Pressure on power companies to act as energy woes mount

Action is desperately needed as large power companies profit while growing numbers of manufacturers and households power down, unable to afford soaring electricity bills, commentators say.

Wholesale electricity prices doubled in the last three weeks, and rose to more than $900 per megawatt hour on Wednesday, with New Zealand's hydro lakes storage drastically lower than normal for this time of year and households warned to expect big increases in their bills.

North Island pulp and paper plants have also temporarily closed down, and businesses have turned hundreds of workers away.

University of Auckland law and social policy professor Jodi Gardner told Checkpoint 300,000 people lived in 'energy hardship' - last year 40,000 people said they had gone without power, and nearly one in five people were worried about being able to afford their power bill.

She said considerable social and political pressure would likely be needed to encourage power companies "to rise up to the duties that I think a lot of people in society think they have".

This week, Associate Energy Minister Shane Jones accused the big energy generators of profiteering and revealed the government was investigating ways to force them to cut prices.

Gardner would like to see New Zealand power companies set up a self-regulating model similar to one used by the UK telecommunications industry to provide affordable and reliable internet and phone services for people on low incomes for the equivalent of about $NZ30 a month.

"It was part of them recognising that to be part of society today you need to be able to get online and you need to be able to phone people. And if that can be considered a basic human right and something that everyone needs, then surely electricity and the ability to heat your home is even more of a fundamental human right.

"We have energy companies that are receiving some incredible windfall profits, and as part of their obligation to give back to society it's not much to expect them to sacrifice a small portion of that to ensure that all households have access to electricity and can heat their homes."

A government-funded winter energy payment for beneficiaries - of $31.82 a week for couples and $20.46 for single people - already exists, but Gardner said more clearly needed to be done and it was reasonable to look to "neighbours" who are billion-dollar-earning power companies to help their communities.

'Ripple effect' will hurt communities

Several big businesses rocked by the increases in the cost of power said they now face closure, with one saying its power bill had gone up 600 percent.

Another major pulp mill has been forced to close due to crippling power prices - which it said would have serious knock-on effects for the area's economy. The Pan Pac mill in Hawke's Bay has stopped all pulp production, saying the cost of electricity means it is now cheaper to shut down rather than produce at a lost.

Pan Pac Forest Products managing director Tony Clifford told Midday Report it is unclear when their plant north of Napier would be able to reopen, causing uncertainty for the whole supply chain.

"Normally we would be producing - with the mill going at full capacity - upwards of 700 dried tonnes a day of pulp, and that represents on a weekly basis, millions of dollars," Clifford said.

The "ripple effect" from the shut down would cause economic hurt for the communities surrounding them, the workers, companies who normally sold the factory supplies, the transport operators and the Port of Napier, he said.

"The pulping process is both energy intensive, but we're also trade exposed - meaning that we have to compete internationally with other suppliers of mechanical pulp, so there's absolutely no possibility of passing on high power prices into our supply chain. So we've got no option but to idle or cease production until power prices return.

Clifford said once the Tauhara geothermal power station east of Taupō opens (expected later this year), and reaches commercial operation level, a power purchasing agreement with Pan Pac comes into play that will give them more options.

"But until that commercial operation level is triggered, we are now pretty much 100 percent exposed to the spot market," he said.

The mill shut downs will have a wide affect many people, communities and industries, Clifford warned.

Pan Pac purchases manufacturing ingredients like chemicals domestically, as well as wood chips from sawmills throughout New Zealand.

Read more:

• An estimated 40,000 households had their power turned off due to unpaid bills, in 2023
• Power shortages - what's being done to keep the lights on?

But: "If we're not producing pulp we just can't take their chip," Clifford said. "And if those factories can't supply, then they run into issues with idling and being exposed to fixed costs," while trucking firms and local ports also lose business.

"We've got a pretty integrated supply chain, and when one of the links in the supply chain and when one of the links in the chain fails it certainly ripples up and down those chains, so there's significant consequential impacts.

"Obviously I can only really speak on behalf of Pan Pac, but our other main competitor in New Zealand, Winstone Pulp currently has their pulp mill shut for the same reason. Pan Pacs Pulp and Winstone Pulp both go through the Port of Napier ... probably total forestry products represent 35-40 percent of the products through the port and ... just the pulp... might represent 20 percent."

Clifford and other representatives from businesses that are energy intensive and trade-exposed met with government ministers on Wednesday, "to really explain the integrated nature of the forest product supplies chain... what I call the ecosystem that supports our business and lives off our business," he said.

"I believe now they understand the scale of the problem."