Energy crisis intensifies pressure on utilities to act

Workers at the multimillion-dollar Pan Pac pulp mill near Napier have come to a standstill because of high electricity prices and are calling on the Government to do more.
photo: Provided by/WB

Critics say action is needed urgently as big power companies profit and more manufacturers and households go without power because they can’t afford rising electricity bills.

Wholesale electricity prices have doubled in the past three weeks, rising to more than $900 a megawatt-hour on Wednesday, and household electricity bills are expected to rise sharply as New Zealand’s hydropower stations are running well below normal levels for this time of year.

North Island Pulp and Paper Mill Also temporarily closedcompanies rejected hundreds of workers.

Jody Gardner, professor of law and social policy at the University of Oakland, told Checkpoints 300,000 people live in “energy distress” – 40,000 last year said they had lost power, and nearly one in five worried about whether they could afford their electricity bills.

She said it would probably take considerable social and political pressure to encourage power companies to “fulfill the responsibilities that many in society believe they should have”.

This week, Deputy Secretary of Energy Sean Jones Accusations Big energy producers are profiteering and have revealed the government is looking at ways to force them to lower prices.

Gardner wants New Zealand’s power companies to set up a self-regulatory model similar to the one used by Britain’s telecoms industry, which provides cheap, reliable internet and phone services for about NZ$30 a month to low-income people.

“They realise that to be a part of society today, you need to be able to access the internet, you need to be able to make phone calls. If that can be seen as a basic human right and something that everyone needs, then surely electricity and the ability to heat your home are more basic human rights.

“Our energy companies are making some incredible windfall profits and it’s not too much to expect them to sacrifice a small portion of that to ensure all homes have access to electricity and heating as part of their obligation to give back to society.”

Social policy professor Jodi Gardner said too many New Zealanders were finding electricity costs unaffordable.
photo: 123 RF

The government already provides a $31.82 per week winter energy supplement for beneficiaries, but Gardner said clearer measures were needed and it was reasonable to ask “neighbours” – power companies with billions of dollars in revenue – to help their communities.

‘Ripple effect’ will hurt communities

Several large businesses hit by the rising electricity prices said they now faced closure, with one business saying its bill had risen by 600 per cent.

Another major pulp mill has been forced to close due to high electricity prices, in what it says will be a severe knock-on effect for the region’s economy. Pan Pac Pulp Mill in Hawke’s Bay has stopped all pulp production, saying the cost of electricity means it is now cheaper to shut down than to produce at a loss.

Tony Clifford, Managing Director of Pan Pac Forest Products said: Lunch Report It is unclear when their factory north of Napier will be able to reopen, creating uncertainty across the supply chain.

“Under normal circumstances, at full capacity, we can produce 700 tonnes of dry pulp a day, which on a weekly basis means millions of dollars,” Clifford said.

He said the “ripple effect” of the closure would cause economic damage to surrounding communities, workers, companies that normally sell supplies to the factory, transport operators and the Port of Napier.

“Not only is the pulping process energy intensive, but we are also subject to trade risk – meaning we have to compete internationally with other mechanical pulp suppliers, so it is absolutely impossible to pass on high electricity prices to our supply chain. As a result, we have no choice but to shut down or cease production until electricity prices recover.

Clifford once said Tauhara Geothermal Power Station Once the power plant east of Taupo opens (expected later this year) and reaches commercial operation levels, the power purchase agreement with Pan Pac will come into play, giving them more options.

“But we are now almost 100% dependent on the spot market before commercial operating levels are triggered,” he said.

Clifford warned that the closures would have widespread impacts on many people, communities and industries.

Pan Pac sources its manufacturing raw materials, such as chemicals, domestically, and its wood chips from sawmills across New Zealand.

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But: “If we don’t make pulp, we can’t take their wood chips,” Clifford said. “If these mills can’t supply, then they face downtime and fixed costs,” while trucking companies and local ports lose business, too.

“We have a fairly integrated supply chain and when one link in the supply chain fails it certainly has a knock-on effect throughout the supply chain so there are significant consequences.

“Obviously I can only speak for Pan Pac but our other major competitor in New Zealand, Winstone Pulp, has also closed their pulp mill at the moment for the same reason. Pan Pacs Pulp and Winstone Pulp both go through Napier Port… total forestry products are probably 35-40% of the products that go through the port, while… pulp alone… is probably 20%.”

Clifford and other representatives from energy-intensive and trade-intensive businesses met with government ministers on Wednesday “to really explain the integrated nature of the forest products supply chain … what I call the ecosystem that supports our business and lives off our business,” he said.

“I believe now they understand the seriousness of the problem.”