The article below articulates a frustration shared by many across the wider electricity industry as well as some consumers, with the Electricity Authority's Transmission Pricing Review. This thing has been going on for over 7 years with changes of thinking, consultation after consultation with no positive for all consumer, outcomes.
This is about restructuring the allocation of transmission costs for future investment by Transpower in their infrastructure to deliver electricity to distributors/lines companies, which are in the end borne by all consumers through their power bill - residential and business. This process is about supposedly making it fair for all.
The question is - how fair is the current structure and what does the new proposed structure look like and what are the benefits and savings? Some believe the current arrangement is fair, the EA and others don't. Sounds like there will be winners and there will be losers. And thats the problem. The EA believe some regions are not paying their share and their "proposal" is to charge more to those in Auckland, North Auckland, parts of the BOP and several other regions for transmission of electricity from south to north, while some regions, consumers and power companies including the Tiwai Aluminium Smelter, (which the government gave a handout to, to mitigate the threat/risk of them moving out of NZ) Meridian and Contact Energy, all pay less for transmission costs.
Yes we hear you - how can this be?!? Read between the lines. The really weird thing is, as stated in the article below - if this is about net savings for NZ Inc, the savings are less than 1.2% of the total operating revenue of Transpower!! Reality is, that it is a transfer of costs to consumers to help guess who?!? SEANZ is certainly not a lone voice in this space as other pundits, industry commentators and analysts arrive at the same conclusion. What are the true drivers and who is driving it?!?
To make it worse, during the process, the concerns raised in 60 expert reports on this thing have not been addressed by the regulator, EA. Go figure!!!
And if distributed generation/solar PV and batteries installation numbers continue on the same growth trajectory, some of that transpower infrastructure may become wasted and redundant. As their CEO said publically last year "transpower may become a centralised battery charging service for all consumers".
The outcome is due to be released in April from the EA.
Originally Published in the NZ Herald. By Kim Campbell, CEO of the Employers and Manufacturers Association.
Aotearoa - the land of the long white cloud. While it's a romantic description it also aptly depicts the infrastructure challenges we face.
Our geography, comprised of long, narrow islands sprinkled with mountains, presents many transport and access headaches.
So we built transport, electricity and telecommunications infrastructure to overcome our unique geography, and we smoothed the costs across our dispersed population.
These realities have driven investment, no more so than in our taxpayer-owned monopoly, Transpower, whose important job it is to deliver bulk electricity from wherever it is generated to distribution hubs throughout the country.
Transpower has invested in recent years to get power to where it's needed, or where the system was weak. Remember the famous D-shackle incident in 2006, when Auckland lost power for several days? Partly as a result, hundreds of millions of dollars were spent on improving reliability and capacity for the upper North Island over the following six years.
Up to the present day, we've had a very good system for paying for the service Transpower provides. Costs have been shared between consumers, who get electricity sent to their regions, and the big power companies, who have their goods delivered to those regional markets. People and businesses have made locational and investment decisions based on the idea that the current pricing formula would be adhered to.
That's all about to change if the Electricity Authority gets its way. They say the system is hopelessly inefficient, and the people who benefit from the grid aren't paying enough.
They're proposing a very complex new pricing method that would require Transpower to try to predict the benefits of the grid for consumers and power companies, for 30 years into the future. Based on these forecasts, they'll then have to work out what to start charging people today. And even if their predictions prove to be wrong, the charges won't change through time.
The resulting fix will see everyone in the upper North Island start paying more, and some of the big power companies less to have their power delivered to you. And the Tiwai Point smelter will also get a big annual discount, on the basis that they don't benefit from that upper North Island investment. But it gets worse - instead of just changing how we pay for new transmission lines, they're going to backdate all this to include everything that's been built since 2004.
How does this play out for consumers? The $59 million extra those in the Vector area would pay will hit average residential customers about $74 extra each year. Small businesses would see their power bills go up $113 each year, other consumers such as schools an additional $1200 and large electricity users like hospitals up to $17,000 extra every year. There are increases for every consumer in the Counties Power area, and across the whole of Northland too. Then there's the impact on your rates, as every council facility in all these areas (from buildings to pumping stations) also gets charged more.
On the other hand, the three big winners - Meridian Energy (who pocket around $60m a year), Contact Energy ($16m a year) and Pacific Aluminium (over $15m) - will receive most of the money from this re-jigging.
Many households and businesses in New Zealand (outside of the upper North Island) could also see a small reduction in their bills.
And the result? The estimated net savings from all this disruption, over the very long term, are marginal and may not exceed $10m a year nationally or may fail to achieve a positive net benefit at all. When the annual cost of running Transpower is $900m a year that's margin of error territory.
The Electricity Authority is expected to make a final decision in April - this is at the end of deliberations which started in 2009.
There is no right of appeal. If it takes eight years to try to create a better system, which most of the industry still don't believe in, you'd have to conclude there can't be much wrong with what we've already got.
The current model is well regarded internationally and supported by experts, it works well and should remain. We have submitted accordingly on behalf of our members. The Government says it can't intervene, and the EA says economic harm is not their brief. But someone in authority needs to put an end to this nonsense and demand a moratorium on the process until it's been clearly determined that an overhaul is even required.