Transpower said it will allow generators to access "contingent storage" at lakes Tekapo, Pūkaki, and Hāwea amid risks to electricity supply resulting from historically low lake levels.
The move comes as controlled hydro storage is at just 55% of average for this time of year, among the lowest levels since records began.
Transpower executive general manager Operations Chantelle Bramley said generators would be able to access the stored water if a security of supply alert status was triggered.
“Contingent storage is water in hydro lakes that electricity generators can only access for generation at specific times to mitigate the risk of an electricity shortage,” Ms Bramley said.
“A key consideration in our decision has been that if hydro generators can’t access their contingent storage, they will have limited generation capability, which will increase system security risks.
“While storage levels tend to increase in spring as rain falls, our decision will give industry increased flexibility to respond to reduce system security risks if there is not sufficient rain and the situation continues to deteriorate.”
Electricity Retailers' Association chief executive Bridget Abernethy told RNZ her body supported the proposal.
"We have to look at all options to provide the flexibility that we need at the moment."
Referring to the Methanex deal to allow more gas for electricity generation and a supply cutback at Tiwai Point aluminium smelter, she welcomed them saying: "It's all hands on decks to try and find solutions."
It was unfair to say the generators had been sitting on consents and not been investing their huge profits in new sources of generation, Abernethy said.
"Investment in new generation has doubled in the past 18 months," she said, adding that the gas supply reduction and a dry year had made for a challenging year.
The uncertainty around the Labour government's plans for the Onslow battery farm was among uncertainties the sector had faced in the last five years.
"These are really big long-term investments and I think certainty and stability is exactly what is required for those companies to make those long-term investments."
The Electricity Authority says more generation is needed, rather than a campaign to save power.
Chief executive Sarah Gillies told Morning Report she shares the minister's concerns about the state of the industry, and the situation is not sustainable.
But she said it has already made recommendations on how to address the supply challenge, and prices have come down.
The energy sector was in a transition period with more generation needing to come to the market, especially in light of the rapidly dimishing gas supplies.
"We are in a very difficult part of the transition but we do have a plan for that, and with the transition accelerating we, as the regulator, are working with the industry and other agencies to make sure everybody accelerates their response to that increasing pace of transition."
However, there was "no quick fix" to the supply challenges.
The Electricity Authority was tracking whether what the companies say they are going to do in terms of new generation was happening, and if not, why not.
On the looming Transpower decision on whether to allow generators to take more water from the storage lakes, she said it was one tool in the toolkit that could be considered.
- additional reporting RNZ
