Change would mean cheaper power for Otago

The Benmore dam. Photo: ODT files
The Benmore dam. Photo: ODT files
The Electricity Authority is standing its ground and pressing on with radical change to the way people pay for transmission of their electricity.

At stake is the cost of funding 12,000 kilometres of high voltage wires, which carry power around the country.

The annual fee for running this system is $918 million a year, or 10 percent of an average power bill.

The Electricity Authority has wanted to change this for years, saying those who benefit from the installation of new lines should pay more.

This encountered stiff opposition, because it would increase power bills for people in places like Auckland and Northland, who live far away from most electricity generating plants.

However, in a new statement, the Electricity Authority says change is essential, because the current system is unsustainable.

Electricity Authority chief executive Carl Hansen said the current methodology had several very unsatisfactory features.

"One of them is that parties benefiting from transmission upgrades don't pay for the full cost of those upgrades, and parties that don't benefit at all are paying for them.

"This is leading to poor outcomes for consumers overall," he said.

"Batteries are getting cheaper ... however the current transmission pricing approach will encourage businesses to buy batteries when the purpose is largely to shift their transmission charges to other customers.

"This will make electricity more expensive for others and not reduce the total cost. This is clearly not sustainable."

Mr Hansen said reforming the way transmission was paid for was needed now more than ever.

"The longer the current transmission pricing methodology stays in place, the greater the risk that investors will make decisions that end up costing consumers more through higher transmission charges over the long term."

One of the beneficiaries of any change would be the aluminium smelter in Southland, which paid $72m last year in transmission costs for electricity produced nearby.

However, any change would disadvantage another big industry, the steel mill at Glenbrook, south of Auckland.

Changes to transmission costs have been argued for most of this decade.

They encountered strong political opposition from Auckland and Northland, and they were also delayed by some faulty analysis done for the authority.

But the authority has signalled that change is now back on track.

"This is a priority piece of work for the authority and we want a new transmission pricing regime to be in place as soon as possible," Mr Hansen said.

Comments

So they should pay extra in the North Island for South Island power.

Finally a potential break for Otago! We should take the principle further, why do we in Otago pay for Auckland's development/infrastructure? Otago taxes should mostly remain in Otago for the benefit of Otago, not North Islanders.

Wow if the line charge is roughly 10% and Southland Aluminium smelter line charge is $72m....!