South Island power generators are sick of paying for the Cook Strait cable, and Meridian Energy is operating stations below capacity to cut costs.
Operation costs of the HVDC cable, which links power supply in the North and South Islands are divided between power generators in the South at an annual cost of "many millions of dollars", Meridian external relations manager Alan Seay said yesterday.
For many years, South Island power was sent north to meet demand.
However, low hydro inflows and increasing demand in the South meant North Island generation often "kept the South going", he said.
In order to end "discrimination against South Island generators", Meridian wanted a charging regime which "truly reflects who the users are".
Due to the high cost of using the cable, it was often not "commercially responsible" to have all of Meridian's hydro stations generating at capacity.
Benmore dam is operating 90MW below its capacity of 540MW because it is "not economic for us to send that power north" and it is not needed in the South.
The cost of transmission was also one of the reasons behind the decommissioning of a 15MW unit at the Waitaki dam, he said.
The cable is to be improved - at a cost of about $670 million - by 2012 with the construction of a pole.
However, the upgrade would not put an end to the "long-running argument" over the charging regime.
Contact Energy communications manager Jonathan Hill described the cable as an "absolutely critical part" of New Zealand's energy industry.
The cable was of benefit to the entire market and needed "to be treated as any other part of the network", he said.
Contact had not made the same decision as Meridian to limit generation but output was sometimes restricted in the company's hydro stations due to a "constrained" transmission network.
A lower South Island grid upgrade, proposed by Transpower, was "strongly supported", he said.
Electricity Commission chairman David Caygill said the upgrade involved the lines between Roxburgh and Twizel and could cost up to $170 million.
The project was in a discussion stage and a decision on it would be made in the next few months.
The commission was also reviewing transmission pricing methodology.
Charges for use of the cable would be reviewed, along with pricing in general, Mr Caygill said.
Within the next three months, he expected to release a set of options for pricing structures, from which one would be selected.
He could understand why Meridian was concerned about the charges but believed the most logical time to change would be after the HVDC cable was upgraded.
