Smelter adds $200 a household

THE Electricity Authority (EA) says households may be paying an extra $200 a year for power as they subsidise the cheap energy the Tiwai Point Aluminium Smelter receives.

The authority has just released its review into the wholesale electricity market to see if it is competitive, following a prolonged period of high spot prices and market volatility.

‘‘The arrangement could be wasteful,’’ EA chief executive James StevensonWallace said.

‘‘The subsidy maintains demand and keeps prices high in the wholesale market.’’

He said as a consequence households could be paying up to $200 more per until 2024, when the power supply contract between the power generators and the smelter expires.

Mr StevensonWallace said the arrangement had led to greater electricity demand, higher wholesale electricity prices, and more gas and coal generation.

However, he said no competitions rules had been broken, but it was looking at whether the market rules that allowed this to happen need to be changed.

The Authority’s review extended back to 2018 when shortages at the Pohukura gas field first emerged, which had put upward pressure on prices.

The situation was compounded earlier this year when the ongoing gas shortages, combined with dry weather, low hydro storage and a lack of wind saw wholesale prices soar sevenfold.

This prompted questions from the Minister for Energy and Resources Megan Woods and the Major Electricity

Users Group as to whether prices were aligned with the level of scarcity in the market.

‘‘The review observed that elevated prices do not always match underlying supply and demand conditions and at times, the market price over cost is at times high . . . though noting this is sensitive to the cost assumptions used,’’ Mr StevensonWallace said.

‘‘There is some evidence that market power may have been exercised through economic withholding.

‘‘However, different indicators provide conflicting views,’’ he said. — RNZ