Power bills to rise in Auckland and Northland under Electricity Authority review plan

Transmission costs make up about 10 per cent of the average household power bill.
MARION VAN DIJK/FAIRFAX NZ

Transmission costs make up about 10 per cent of the average household power bill.

Consumers in Auckland and 13 other regions can expect to pay more for their electricity, as a result of an overhaul of pricing for the national grid.

But there is better news for consumers in 15 other regions who should pay less under the proposed changes.

The Electricity Authority (EA) has released its preferred option for a fairer way of paying for the national grid.

Westport is among the areas facing a rise in power bills in the proposal.
MARION VAN DIJK/FAIRFAX NZ

Westport is among the areas facing a rise in power bills in the proposal.

Access to the grid, provided by state-owned monopoly Transpower, makes up about 10 per cent of the average household power bill.

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Under the EA's preferred option, released on Tuesday morning, some regions will have to pay more for the benefit of better infrastructure.

The EA also wants to remove special pricing arrangements for generators such as solar that connect to a local network, ...
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The EA also wants to remove special pricing arrangements for generators such as solar that connect to a local network, rather than the national grid.

The overall impact on residential prices would be an increase of 0.5 per cent, or $11 per household per year.

The biggest increases would be worn by those in Auckland, Northland, Ashburton and the West Coast.

WINNERS AND LOSERS

Lower prices: Invercargill (-$64), South Canterbury (-$6), Central Otago and Dunedin (-$14-57), Hawke's Bay (-$29), East Coast (-$24-79), Queenstown (-$33), North Canterbury (-$19-34), Marlborough (-$31-34), Tasman (-$4-5), Christchurch (-$44-48), Western BOP/Taranaki (-$2-16), Tararua (-$28), Rotorua (-$25-51), Waikato North (-$10), Wellington (-$35-36).

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Higher prices: Ashburton ($102-117), Westport ($26), South Auckland ($33), Eastern BOP ($3-46), Waitaki ($21), Whangarei ($36-64), Waikato South ($4-41), Northland ($21-87), Auckland ($58-66), Hokitika ($49-66).

No change, or not clear: Horowhenua (-$6 to $14), Otago (-$4 to $12), Hamilton (-$7 to $14), Southland (-$20 to $4).

EA chief executive Carl Hansen said the regions seeing an increase were those that had benefited from substantial recent grid upgrades, or where transmission prices had been lower than average.

"In every region, the benefit from these recent investments greatly exceeds the area-of-benefit charges proposed to pay for them."

The proposed "'area-of-benefit" charge allocated the cost of a transmission investment to generators, distributors and industrial consumers in the region.

A "residual charge" applied to distributors and industrial customers would cover Transpower's overheads and any un-recovered costs.

One of the biggest beneficiaries of the overhaul would be Rio Tinto's Tiwai Point aluminium smelter in Southland, with annual charges projected to drop by $21 million.

However, that was less than the estimated $50m saving it stood to gain in one of the EA's previous proposals, which was decried by some commentators as "corporate welfare".

If Rio Tinto chose to close the smelter, as it has previously warned, the EA said there would be an increase in prices for consumers of about 1 per cent.

Any change to the pricing model would not come into effect until April 2019.

Of the power companies, Meridian would save $57m under the new model, Contact $16m, Genesis just over $1m and Trustpower less than $1m.

Mighty River Power would have to pay an extra $4.1m.

LONG-TERM SAVINGS

Hansen said over time, the proposal would reduce costs for the industry and prices for consumers.

That was because it created a strong incentive for much more efficient investment, rather than the wasteful activity that occurred under the current regime.

Australian economic consulting firm Oakley Greenwood's cost-benefit analysis had found net economic benefits of $213m over 20 years.

However, Green Party energy spokesperson Gareth Hughes said the EA should treat the network as a national asset for the benefit of all, not "playing people who live in different regions off against each other".

"Parts of the Electricity Authority's document read like people will just up and move their lives around the country to maximise economic efficiency in the power grid, which is ridiculous."

Hughes said allowing major industrial users more scope to ask for special discounts was blatantly pitting the interests of big businesses against families having warm homes in the winter.

Neither Genesis Energy nor Meridian would comment.

Flick Electric chief executive Steve O'Connor said the company would immediately pass through  any change in South Island network pricing to customers' bills.

"While there's still a lot of water to go under the bridge, we believe the EA has moved in the right direction."

Trustpower chief executive Vince Hawksworth said the new proposed regime was a "solution looking for a problem that doesn't exist".

His company was broadly happy with existing pricing arrangements, he said.

"Our major point is this may well have been something that was worth doing before the major investments of the last 10 years were done."

While the new pricing system for the national grid would create winners and losers, "the reality is the whole transmission system is a 'sunk cost'", he said.

It was too soon to say what impact the proposal would have on Trustpower and its customers.

But he said the pricing reforms had already been long and complicated, and the EA's latest announcement was just another step in the process.

The EA consultation closes on July 26, with a final decision expected by October.

CHANGES TO LOCAL GENERATION

The EA also wants to remove special pricing arrangements for generators such as solar and some wind farms that connect to a local network, rather than the national grid.

Hansen said consumers were currently paying these "distributed" generators $25m to $35m for no benefit.

That was because they were paid to operate to avoid transmission charges, rather than to defer or reduce transmission investments and costs.

"This just leads to higher transmission charges on other distributors and their consumers, which is a 'pass the parcel' outcome that's of no benefit to consumers overall."

Hansen said the proposal would make the playing field more level for all generators, with Transpower forging individual agreements with each one.

If adopted, the change would be phased in from April next year.

The proposal was not expected to "materially" affect greenhouse gas emissions, with 95 per cent of consents for new electricity generation for renewable sources.

Hughes said the EA was going against the worldwide trend toward more local, distributed generation.

"Discouraging local distributed generation is likely to actually increase transmission costs in the long term, because we'll have to keep paying to upgrade the lines to carry power in from far away."

 - Stuff

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