Dams in the South Island were drained in December last year following record rainfall. But the water should ve been used to generate extra electricity, which would ve then cut wholesale power prices. You would expect the abundance of fuel to reduce the cost of water going through the hydro dam, so you d expect the spot price to come down during that period, Electricity Authority CEO James Stevenson-Wallace says.
Instead, prices went up because of the water spillage and four other exceptional events. We had a confluence of five events that reduced the competitive pressure on the market, he says.
The water spillage was the main problem. The Authority says the water could ve powered about 1.2 million homes for a day. The total extra cost is about $70 million.