The transmission of electricity between the North and South Islands has long been contentious and the debate is about to become much louder.
The Electricity Authority is proposing changes to transmission pricing guidelines which it says will alter the way transmission charges are shared among customers.
Charges will be linked to the transmission services delivered and the costs involved.
The authority is also proposing a wider range of circumstances for which Transpower — the Government-owned transmission company — may discount its transmission charges to particular customers.
According to the authority, the current pricing methodology encourages wasteful use of transmission grid and investment in transmission and generation assets.
And that is not in the best interests of the electricity consumers and the New Zealand economy.
The economic cost to New Zealand exceeds $200 million.
If no change is made, future consumers may pay hundreds of millions of dollars more for electricity than necessary.
Many will remember the calls to "cut the cable" because of the perception the South Island was subsidising the North Island through the generous hydro generation assets in the south.
For example, residents close to the Waitaki River hydro scheme could not understand why their electricity prices were so high when they could literally see where the power was being generated.
Unfortunately for the critics, some cold, dry winters meant North Island power was brought south to augment lower hydro generation.
The latest dispute has serious implications for industry in both the north and the south and has divided groups who are normally allies.
The Otago-Southland Employers Association has taken a firm stance, saying the region cannot afford to keep paying for infrastructure it does not use.
More than $1.3 billion of transmission investment has been commissioned in the upper North Island since 2004.
But only 39% of that upgrade is being paid for by the upper North Island.
Transmission costs in the lower North Island and South Island have increased by 61% on average to pay for the upgrades.
EMA Northern, formerly the Employers and Manufacturers Association and aligned with the Otago-Southland Employers on many issues, says proposals to change the way households and businesses pay for their electricity will have a devastating impact on some of the most vulnerable communities.
Not only will some face a big new increase in their power bills, but others will face the possibility of losing their jobs if employers cannot afford to stay operating.
A group dominated by North Island power companies, the Auckland Chamber of Commerce and New Zealand Steel, has been formed to fight the changes which will mean their power prices rising as no longer will they be subsidised by the south.
In an analogy similar to regional petrol prices, the further you are away from petrol supplies, or electricity generation, the higher price you will pay.
Petrol in parts of the North Island is significantly lower in price than south of the Waitaki.
A key component of the authority’s proposal is an "area-of-benefit" charge.
This approach allocates the cost of a transmission investment to generators, distributors and industrial consumers located in areas of the country that benefit from the investment.
The best example of areas of benefit include Otago and Southland, which has major hydro generation assets.
If the authority is to be believed, its proposal will reduce costs in the electricity industry and reduce prices for consumers from what they would otherwise be.
The immediate overall impact of the proposal on the average residential electricity bill is fairly modest.
In 15 regions, electricity consumers’ bills will decrease.
In the remaining 14 regions, the average bill increase is less than $50 a year.
That seems a small price to pay to redress the balance of power.
