Power consumers in Southland, the lower North Island, and some big industrial users stand to benefit the most from proposed changes to transmission costs.
The Electricity Authority plans to make user-pays the basis of pricing power distribution, putting the cost of upgrades on to consumers who gain the most benefit.
Consumers in Southand might save as much as $80 a year, while users in the central North Island and parts of the South Island might see their bills rise by up to $40 a year.
Authority chair James Stevenson-Wallace said the new approach, which had been on the drawing board for more than a decade, would lead to fairer prices, better investment decisions, and encourage renewable energy projects to reduce carbon emissions.
He said the current system unfairly spread the cost of the national grid across all consumers around the country.
“The current transmission pricing methodology is based on a peak charge which is often too high. Some consumers end up paying a premium when power is most valuable to them – even when there is plenty of transmission capacity available,” Stevenson-Wallace said.
“This creates perverse results – you’ve got customers investing in alternative generation, including diesel generators, just to avoid using the grid at peak times despite there being plenty of supply. This behaviour just shifts costs to others and in some cases increases carbon emissions.”
The authority said the average rise or fall in retail power bills would be about $19 a year, and there would be a cap on price moves to limit their effect. The changes would come into effect in April 2023.
Lifeline for aluminium smelter?
The new pricing system would offer the chance of some relief for the Tiwai aluminium smelter at Bluff, which has long complained that crippling transmission costs have undermined its financial viability.
The Electricity Authority said there would be a new prudent discount policy, which would allow the national grid operator, Transpower, to cut transmission prices to businesses not gaining any benefit from system upgrades or which might be forced to close and quit the country.
The smelter, which employs more than 800 people, has long complained that it pays too much for transmission, estimating the extra cost at around $200 million over a decade.
The majority owner of Tiwai Point, Rio Tinto, is still doing a strategic review, which was supposed to be finished by the end of March. A spokesperson for the company last week was unable to say when it would be finished.
Power suppliers Meridian and Contact are understood to have offered further price cuts to try to induce the smelter to stay.
Stevenson-Wallace said the new pricing method would also encourage better investment decisions on new renewable generation, which would help the move to a low carbon economy.
Meanwhile, a group of disaffected lines companies and big power users has been quick damn the authority’s plan and called on the government to stop it.
The Transmission Pricing Group (TPM) said the move to push through such major changes would hurt vulnerable households and businesses.
It said the authority had not listened to objectors and alternate analysis and the government needed to force the authority to reconsider, especially the impact on local communities facing energy poverty.
TPM said with such uncertainty about the economy and the future of major users such as the Tiwai Point aluminium smelter, now was not the time to push through major changes to the energy sector.
“We are facing a once-in-a-generation economic crisis. It beggars belief the authority would choose now to make these changes, when so many households and businesses are facing such uncertainty.
“Progressing with reforms that separate New Zealanders into winners and losers, without materially benefiting the country overall, cannot be justified,” it said.
The group includes generator/retailer Trustpower, several lines companies, including Auckland’s Vector, and big paper makers Norske Skog and Oji Fibre.