New Zealand has run out of power generation options, forcing the Government to fire up the Whirinaki reserve power station in Hawkes Bay.

Electricity spot prices reached 20c a kilowatt hour (kWh), well above average prices, yesterday afternoon, at which point the diesel- powered Whirinaki station was switched on.

Auckland power industry consultant Bryan Leyland said the country had its "back against the wall" in terms of generation options.

"We had no spare generation anywhere in the country," he said. While he expected rain would relieve the situation, for the time being the industry was having to cut production.

However, energy analyst John Noble said switching on the diesel- powered Whirinaki station was not "a big deal" for household consumers.

"It won't impact on the smaller consumers but it already has had a big impact on the large consumers," he said.

He said there was no risk of blackouts in the immediate future, but there was a possibility that New Zealanders would need to take power conservation measures next winter.

Electricity Commission chairman Roy Hemingway said it had been some time since the Whirinaki station was used, but that was not a cause for concern. He said the high prices in the market would have been the reason for the station switching on, although he was not sure what had caused prices to soar.

Transpower spokesman Chris Roberts also suggested that prices were the major problem. He said hydro lake levels were low, but he felt there was no need for concern. "As long as we get some rain between now and February we shouldn't have a problem."

But some bigger consumers are already feeling the pinch.

The New Zealand Aluminium Smelter plant at Tiwai point has already reduced production by more than 3 per cent, and now listed miner OceanaGold wants to renegotiate its electricity contract as it watches spot prices rise.

The listed New Zealand goldminer operates the country's largest goldmine at Macraes Flat in East Otago. It is also developing the Frasers underground mine at Macraes mine and the Globe Progress open- cast mine near Reefton.

The Macraes operation requires a constant 24 megawatts (MW) of electricity. Under its current contract with state-owned generator and retailer Meridian Energy, Oceana has to buy 40 per cent of its power on the spot market.

Oceana managing director Steve Orr said spot prices heading for 20c a kWh were of significant concern, although they had not affected production yet.

South Island spot prices crept up yesterday.

"Sixty per cent of our power needs are locked in with the long- term contract. With spot prices, usually at this time of the year we should be getting our low power costs, when we don't have a drought, of 2.5c to 3c a kWh," Orr said.

"We had budgeted 60% would be at 6c a kWh, 40% would be lower. It's a big problem."

While he was keen to negotiate a new agreement with Meridian, it was not a good time now to do so.

"When rates get more favourable we'll look at it," he said.

Chief operating officer Albert Brantley said Oceana had to "grin and bear it".

The company was making arrangements to increase its power draw to 30MW.

Meridian spokesman Alan Seay said there was still no sign of significant rain to replenish depleted South Island hydro lakes.

"We're still in the same situation. It's not particularly concerning, but we want to see them filled before winter," he said.

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