Transpower has warned there could be power cuts in the North Island on Tuesday evening after a power line carrying power north fell down near Waikari in North Canterbury.

It announced a 'grid emergency” warning there was insufficient generation and transmission capacity to meet electricity demand and provide for contingencies in the North Island between 5pm and 7.30pm.

Spot market electricity prices were surging in the North Island at 6pm, with prices topping $40 a kilowatt hour – about 150 times the price consumers normally pay for power.

The red emergency notice is similar to one Transpower issued at 5.10pm on Monday last week, hours before it was forced to order rolling power cuts that cut off 34,500 homes from power without warning.

Transpower chief executive Alison Andrew says shortly after 5pm that the market was currently stable.

'However, if there is a major plant failure, there is a risk of not being able to meet demand through the evening,” she says.

That was the situation that occurred last Monday when Genesis Energy was forced to take its Tokaanu power station on the Tongariro River offline just before the period of peak evening demand after weeds blown around by a storm blocked its intake gates.

Transpower had issued warnings that power supplies would be tight earlier that day.

Andrew says today's problems had been caused by a conducting wire falling from a tower near State Highway 7 in the Weka Pass area of Waikari.

There was no indication anyone had been hurt, she said.

'We have asked electricity distribution businesses in the North Island to reduce all controllable demand, such as hot water.

'If this does not achieve the reduction we require, we will issue a further notice setting a further target for demand reduction,” she says.

Transpower's notice also called on power companies to increase the amount of generating capacity they were offering to the market.

However, power firms were unable to prevent power cuts last week despite receiving several hours notice of a similar demand.

Andrew said Transpower had crews on hand who would be working overnight to repair the conductor but it did not expect to complete repairs before 'tomorrow afternoon at the earliest”.

Woods announced the terms of reference of an investigation into last week's power cuts earlier on Tuesday, which included calling for recommendations on how to avoid a repeat.

-STUFF/ Tom Pullar-Strecker