Impact of Nordic power price surge spreads

* Metals producers cutting consumption during peak hours

* Statnett says to reorganise grid system in March

* Small Norwegian power retailer Vitel halts operations

By Wojciech Moskwa and Gwladys Fouche

OSLO, Feb 23 (Reuters) - Two leading Norwegian metals producers said on Tuesday they are cutting back on electricity consumption due to surging prices, as Norway's power grid operator Statnett announced a reorganisation of its system.

Forward prices for Nordic electricity  have surged nearly 80 percent since the start of December due in part to much colder than usual temperatures.

Day-ahead Nordic spot electricity stood at 92.70 euros per megawatt hour on Tuesday, compared with some 40 euros in Germany.

"There are very high electricity prices in Norway, especially in mid-Norway where we are exposed," said Lars Nermoen, spokesman for aluminium group Norsk Hydro .

"We do what we can to save energy. A handful of times this year we have reduced our electricity consumption at the Sundal aluminium plant for about an hour or so," Nermoen added.

Silicon producer Elkem, part of Norwegian conglomerate Orkla , said: "We have shut down some of our capacity for an hour or two per day since the strained power situation came along... When it's rational we will reduce consumption."

The day-ahead Nordic spot price, also called the system price on regional power bourse Nord Pool, hit a high of 134.80 euros ($183.1) per megawatt hour on Monday and remains a high 92.70 euros for Wednesday delivery.

That compares with an average system price of 53.38 euros in January and a 2009 average of 35.02 euros, Nord Pool data shows.

Norwegian power prices are part of a single pan-Nordic system which has been strained by well-below normal temperatures since mid-December, which have boosted demand for heating electricity. There has also been less snowfall than normal.

The thinner snow cover means that after the spring thaw less water will flow into reservoirs at hydro-electric plants, which produce about half of the Nordic region's electricity.

Abundant rainfall in most years means that Nordic power prices are usually some 10-20 euros per MWh lower than in Germany, helping keep Nordic industry competitive despite high labour costs in Norway, Sweden, Finland and Denmark.

RETAILER BLUES

Statnett said it would from March reorganise Norway's grid structure by adding a fifth power zone in western Norway, which it said will help avoid problems later in 2010.

"This will increase security of supplies in the region," Statnett boss Oivind Rue told Reuters. "Water reservoir levels in Western Norway are quite low, as are the snow magazines."

The surge in prices also caused Norwegian power retailer Vital to stop delivering electricity to its 23,000 customers.

"Because of the extreme electricity prices recently, among other things because of the cold winter and high electricity demand...Vitel AS will stop as a power supplier," the company said in a statement on its website.

Nordic power traders have said that reduced consumption by industry has helped stabilise the market, along with a slight warming in temperatures from lows at the start of the week.

"The spot price has eased off based on those decisions," said Morten Nilsen, portfolio manager at Bergen Energi. "If you take out large consumption units at this stage, it is helping to reduce the spot price ... It has not had a dramatic effect but of course it has had an effect."

The day-ahead spot price fell to 92.70 per MWh euros on Wednesday from Tuesday's system price of 98.98 euros. But due to reduced flow capabilities between grids, the regional spot price for Sweden, Finland and northern Norway was 133.04 euros, while windy western Denmark had a spot price of just 39.36 euros.

(Editing by Keiron Henderson)