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ZNR UUUUU ZZH
R 180140Z JUN 08
FM AMEMBASSY WELLINGTON
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INFO RUEHNZ/AMCONSUL AUCKLAND 1685
RUEHBY/AMEMBASSY CANBERRA 5197
RUEHDN/AMCONSUL SYDNEY 0686
RHHMUNA/CDR USPACOM HONOLULU HI
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE

UNCLAS SECTION 01 OF 02 WELLINGTON 000189 
 
SIPDIS 
SENSITIVE 
 
STATE FOR STATE FOR EAP/ANP 
PACOM FOR J01E/J2/J233/J5/SJFHQ 
 
E.O. 12958: N/A 
TAGS: PGOV ENRG SENV NZ
SUBJECT: POTENTIAL POWER SHORTAGES COULD MEAN LIGHTS OUT FOR LABOUR 
 
WELLINGTON 00000189  001.2 OF 002 
 
 
¶1.  (SBU)  Summary.  A dry winter has prompted debate about New 
Zealand's power supply as low hydroelectric lake levels bring about 
the prospect of rolling power shortages throughout the country. 
Fearing a political backlash, the Labour Government denies there is 
a problem, while quietly taking measures to bolster electricity 
supply.  The power industry has conducted a public information 
campaign urging households to conserve electricity.  The opposition 
National Party has seized on the issue to berate the government. 
Recent rains have offered some respite but analysts agree that if 
there are power shortages in the run up to the election, Labour's 
defeat at the polls will be a near certainty.  End Summary. 
 
Is There a Power Crisis? 
------------------------ 
 
¶2.  (U)  An extended period of dry weather has meant that water 
levels in lakes that drive New Zealand's hydroelectric power plants 
are currently low enough to warrant concern that the country could 
face a power crisis during the next two-three months.  However, in a 
June 10 press conference, Energy Minister David Parker dismissed 
claims the country was facing rolling power cuts and announced that 
the Government, having considered the situation in Cabinet, would 
take no direct action.  Parker attributed the situation to a dry 
winter, not unlike several in the past decade that have not resulted 
in power cuts.  Prime Minister Helen Clark also denied any 
suggestion of an emergency, yet was careful to remind New Zealanders 
to practice prudent energy consumption in the short term.  The 
Government also endorsed the launch of an industry-backed media 
campaign aimed at domestic, commercial and industrial users urging a 
reduction in electricity consumption by up to 15% during peak early 
evening periods.  In addition, the Government has placed a retired 
plant in New Plymouth back into service and moved forward by three 
months the opening of a new geothermal plant. 
 
¶3.  (U)  The Government's sanguine assessment of the present power 
situation contrasted with that of Patrick Strange of Transpower, 
which owns and operates New Zealand's high-voltage electricity 
transmission grid and is helping to coordinate the power industry's 
response to threaten shortages.  Strange announced that his industry 
is concerned about energy security in the current environment.  He 
noted that New Zealand energy industry is "risk averse; any time 
conservation measures are called for means the situation is serious 
for the power sector. 
 
Possible Political Repercussions for Labour 
------------------------------------------- 
 
¶4.  (SBU)  The Labour Party is conscious of the ramifications 
involved if power cuts became a reality.  With the election only 
months away - scheduled for October or November - Labour are polling 
well behind the opposition National Party.  Any prospect of an 
election victory for Labour would be seriously compromised if there 
were power shortages that impact on voters' quality of life.  If the 
situation worsens, National will focus the public's attention on any 
energy cuts.  With this is mind, Parker and Clark continue to assure 
the public that the Government is managing the problem effectively 
and the situation is well in hand.  Recent rains on the South Island 
(where most of the hydro-lakes are located that supply the country's 
hydroelectric power) have ameliorated the sense of anxiety within 
the Government, but the possibility of power shortages remains given 
the country is moving into the winter months when electricity demand 
is highest. 
 
The Blame Game 
-------------- 
 
¶5.  (U)  The National Party quickly seized on the prospect of a 
looming power crisis and did its best to talk it up in an effort to 
embarrass the Labour Government.  National Energy Spokesman Gerry 
Brownlee accused the Government of ignoring the lower hydro-lake 
levels and relying on increased rainfall to guarantee New Zealand's 
power supply. 
Some Labour supporters, however, laid the blame squarely at the feet 
of the previous National Government, which in the late 1990s 
introduced a series of reforms deregulating the electricity 
industry.  Parker criticized the media for over-hyping the story and 
unnecessarily worrying the public.  Phil O'Reilly, the chief 
executive of Business New Zealand, argued that successive 
governments are at fault, and their poor decisions have led to New 
Zealanders living with the threat of electricity shortages. 
 
Power Problems the New Norm in NZ 
--------------------------------- 
 
¶6.  (U)  New Zealanders have become all too familiar with both the 
 
WELLINGTON 00000189  002.2 OF 002 
 
 
threat and realization of power cuts as the country has lurched from 
energy crunch to energy crunch in recent years.  In 2001, 2003 and 
2006 the public was asked to save power before rain filled the 
hydro-lakes sufficiently to head off any serious problems.  In 1992, 
New Zealand experienced a serious power shortage when businesses 
were forced to use liquid petroleum gas and diesel.  During this 
crisis, street lighting was rationed and households endured hot 
water restrictions for up to 18 hours a day.  Television stations 
went off the air early so viewers went to bed.  In 1998, dry weather 
conditions, high electricity demand and failing infrastructure all 
combined to shut down power to the central business district in 
Auckland, New Zealand's largest city and financial hub, for five 
weeks resulting in a loss to business of tens of millions of 
dollars. 
 
Explaining the Cycle of Power Crises 
------------------------------------ 
 
¶7.  (U)  New Zealand's tendency to experience power shortages is 
connected to the country's heavy reliance on hydro-based energy to 
satisfy demand.  New Zealand hydroelectric stations usually produce 
about 75 percent of New Zealand's electricity.  Periodic dry spells 
can quickly reduce output to 50 percent, and coal, diesel and 
gas-fired power plants make up the shortfall.  However, the strain 
on the national grid often becomes too much, particularly during 
winter when demand is highest. 
 
¶8.  (U)  The Labour Government's commitment to hydro-energy and its 
promise to make New Zealand 95 per cent dependent on renewable 
energy exacerbates nervousness about the country's energy security. 
Clark has announced that the commission of a new geothermal plant 
will be fast-tracked to alleviate some strain.  Some energy analysts 
claim that as long as New Zealand's energy security is dependent on 
the vagrancies of the weather (rainfall, wind) at the expense of 
more traditional means of energy production (coal, gas-fired), the 
prospects of power shortages will continue. 
 
Comment 
------- 
 
¶9.  (SBU)  Given recent polls, the last thing Labour needs is a 
power shortage leading to intermittent power cuts as happened in 
¶1992.  So far, analysts believe that the conservation measures 
already familiar to the New Zealand public will see them through 
another winter.  But the Government is dependent on continued 
rainfall to keep the lake levels up.  The country will soon move 
into a period of increased energy usage in July and August, as 
temperatures drop and the winter school break has families spending 
more time at home.  If the weather does not cooperate and there are 
power shortages, that could dash any hopes that Labour has for a 
narrowing of the polls closer to the election.  End Comment. 
McCormick