Around 60 percent of New Zealand's electricity is normally produced by hydro power stations, but companies such as Contact Energy Ltd., TrustPower Ltd. and state-owned Genesis Power are running more expensive coal and gas-fired stations at full-throttle to compensate for water shortages.

Stuart Burgess of forecaster the National Institute of Water and Atmospheric Research said there was a 50 percent chance South Island rainfall would be normal, rather than lower or higher than normal, over the next three months.

Price separation between New Zealand's North and South Islands abated during the week, as maintenance on the inter-island connector ended, allowing power to flow between the two all week.

Prices at the North Island reference point of Haywards rose 1.0 percent to an average NZ$127.12 per megawatt hour (MWh) ($82.55) while at the South Island reference point of Benmore they fell 8.6 percent, to an average NZ$128.74 per MWh, reflecting the unconstrained inter-connector.

Under normal circumstances cheaper, greener hydro-electric power flows northwards from the South Island but this trend has been reversed after a prolonged dry spell reminiscent of a dry autumn 1992 which preceded power cuts and electricity rationing that winter.

"Another dry week and spot prices are solid, reflecting the value of available generation capacity right now," an analyst said on Wednesday. "We need some rain over the next few weeks to calm growing nerves about winter power shortages."

But Peter Little of forecaster MetService said that while he expected showers over the next two weeks, there was little chance of large amounts of rain filling the depleted catchments.

Energy minister David Parker told a conference last week that while declining lake levels were a concern, they remained within a range where normal electricity capacity can meet demand.

"This year, there will be more North Island thermal generation and less South Island hydro," said Parker. "But I am informed that there is a low probability of the situation becoming dire this year. So while it's possible, it's unlikely."

And the Electricity Commission, a government agency which oversees the sector, has said the risk to power supplies is not so serious as it can order that back-up thermal power stations be fired up to ensure supplies are not disrupted.

That has not stopped companies looking to avoid the threat, with aluminium producer Comalco, which uses 15 percent of New Zealand's power, cutting production by over 10 percent at its Tiwai Point smelter over the next few critical weeks.

New Zealand saw successful power conservation campaigns in 2001 and 2003 after unseasonably low rainfall levels.

Inflows into the South Island, where all electricity is produced by hydro power stations, were 68 percent of average over the past week to Tuesday, rising from 67 percent last week.

Demand rose 1.7 percent to 101,261 gigawatt hours (GWh), also contributing to rising prices.

Market operator M-Co said New Zealand's stored energy was flat over the past seven days at 73 percent of normal levels.