Rule change by Electricity Authority disallows the Tiwai Point aluminium smelter to renew 150MW power contract

After a surprise evaluation of the New Zealand power market, the Electricity Authority has decided to restrict power companies from signing large power deals with customers unless certain conditions are met. This is applicable to energy supply contracts of more than 150 megawatts, meaning power companies would not be allowed to strike a new power supply deal with the Tiwai Point aluminium smelter, without prior approval.

Authority spokesman Sean Martin explains the Tiwai smelter’s power contract is the only one above 150MW and, therefore, requires the authority’s approval for renewal.

The authority’s market policy manager Andrew Doube has explained that this measure has been taken in response to the average household paying above $200 more than they should pay for electricity each year due to the smelter’s current power contract.

He has further said that Tiwai Point’s low-ball price of about 3.5 per kilowatt-hour for power to Meridian Energy has not allowed the wholesale prices of energy to rise higher. This means cheap power for smelter is costing higher prices for everyone else.

Doube believes this move was urgent given the recent announcement that the Tiwai Point aluminium smelter is seeking a new deal of power supply before its current contract expires at the end of 2024.

Deborah Hart, chairwoman of the Consumer Advocacy Council, which was established by the Government this year to represent the interests of consumers and small businesses in the power market, said she was pleased by the authority’s move.

“We absolutely support what the authority is doing. It sends a very clear message to the generators that they must not settle on contracts that disadvantage residential and small business consumers,” said Deborah.

The authority has said this rule change would be effective for nine months until a permanent amendment is introduced.