Flat demand for power generates uncertainty

Last updated 05:00 15/08/2014

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National grid company Transpower has posted a $184 million profit in the June year, down $18m from the previous year, saying it has come to the end of its big projects to make the grid more reliable.

Electricity demand was "relatively flat", Transpower said, despite a strongly growing economy, and future load growth was "uncertain".

The company announced it was paying a final dividend of $91m to the Government, taking total dividends for the year to $151m.

In the past five years, Transpower has spent about $2 billion on big projects, which led to a lift in transmission prices, though that is governed by the Commerce Commission.

But now those big projects were finished, transmission revenues were expected to be "largely flat" or less than inflation over the next five years, chairman Mark Verbiest said yesterday at the annual meeting in Wellington.

Transpower's new chief executive, Alison Andrew, said flat electricity demand for the past few years did not necessarily mean low load growth for the grid.

For example, the Tiwai Pt aluminium smelter used about 15 per cent of New Zealand's electricity.

"Were it to ever close, we'd have over 600 megawatts of very low-cost generation wanting to flow north up the grid towards Auckland - great for New Zealand, but a challenge for us," Andrew said.

Transpower was "well positioned" to fix that if Tiwai did shut, but that showed the uncertainty Transpower faced.

The company had done "a reasonable amount of work on that" and was working closely with Meridian and Contact Energy.

"We are doing engineering work so we know what we need to do and when we need to do it, but we are not going to commit serious amounts of money before we know [if Tiwai might close]," she said.

Demand for electricity was in part driven by big industrial customers. For example, Norkse Skog has reduced its power use recently and Tiwai Pt had also scaled back production.

"Those big shocks can change things," Andrew said.

As well, consumers were using less power as a result of factors such as home-insulation projects.

There was also future uncertainty, if people should use more solar panels or if there was a push to electric cars "which could send demand going the other way".

There were still parts of the country where power demand was growing strongly, such as from dairy farm conversions in the South Island and new dairy factories.

The latest big grid projects to be commissioned were North Auckland and the HVDC Pole 3 project connecting the South and North Islands, which caused Transpower's annual revenue to jump 9 per cent to $941m for the latest June year, up from $861m last year.

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The Wairakei to Whakamaru project was also completed this year.

Transmission charges make up about 9 per cent of the average household power bill.

While revenues were up as Transpower was able to charge more as big projects were completed, the company also faced depreciation, interest costs and write-offs totalling $251 million, up from $205 million in the previous year.

- The Dominion Post

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