Southerners speak out on Electricity Transmission Pricing

( Invercargill Mayor Tim Shadbolt is buoyed by the Southern rally to correct what is seen in the South as a “gross injustice” in the way electricity transmission costs are calculated.

The Electricity Authority has been reviewing the pricing system for almost eight years and began another round of consultation in December 2016.

When submissions closed on February 24, 43 of about 100 submissions were either from Otago-Southland companies and business advocacy groups, or supported the southern view.

Otago-Southland submitters included the Invercargill City Council, the Otago-Southland Employers Association, the Dunedin City Council and the Otago Chamber of Commerce.

Mr Shadbolt praised the efforts of Southern submitters who forwarded their respective cases to the authority in the hope of a “quick correction to years of what is being seen in the South as a gross injustice”.

“Eight years of consultation is enough,” he said. “It is now time for action.”

Transmitting power around the country cost over $900 million a year. Since 2004, Southern electricity customers had borne the brunt of the $1.3 billion of grid investment in the upper North Island but the cost of the investment had been unequally shared, Mr Shadbolt said.

Over that period customers had seen increases in transmission charges of 330 per cent in the South Island, 225 per cent in the lower North Island and 40 per cent in the upper North Island.

Mr Shadbolt said the current pricing system “added insult to injury’’ because 50 per cent of all of New Zealand’s renewable hydro generation was produced in the lower South Island.

“Common logic would suggest that as less infrastructure is being used to support South Island consumers then there may be a price advantage to those residents and industrial users close to the generation. But no! Those close to major generation are paying the lion’s share of getting that power to Auckland. This is a joke.

“Unbelievably, it gets even worse. At a time when New Zealand is striving to increase the level of renewable energy opportunities and to reduce carbon emissions, new South Island generation investments are being scrapped because South Island generators alone are having to pay for the Cook Strait cable.

“This situation cannot be allowed to continue and the Electricity Authority should be allowed to make a determination on transmission pricing that reflects the true cost of transmission to consumers,” Mr Shadbolt said.

The Authority’s proposal will introduce a system requiring the parties benefiting from electricity infrastructure upgrades to pay for them. However, with an estimated investment of $3 billion scheduled in the North Island, there has been strong opposition to that model from northern power companies and others.

“It’s not surprising the major beneficiaries of the current unjust system have created a major storm of disapproval. It is about time that all consumers paid their fair share,” Mr Shadbolt said.

Supporting northern infrastructure upgrades such as transmission upgrades and road and rail projects in Auckland had become the norm for Southerners, he said.

“Unfortunately this is exactly what people like the Chief Executive of the Employers and Manufacturers Association, Kim Campbell, is promoting in regard to transmission pricing. His line is completely at odds with EMA’s sister organisations further south. He is effectively saying that the answer is that Southern business should subsidise Auckland business. How does this approach fit within a free market, user-pays economy?”

The increase for household customers on Auckland’s Vector network had been calculated by the Electricity Authority at $66 per year, or $5.50 per month, Mr Shadbolt said.

“What is more, this increase won’t come in until 2020, by which time the Electricity Authority expects that it will be more than offset by reductions in the regulated level of profits that the grid owner and network companies like Vector are allowed to recover from their customers. This means Auckland customers are actually expected to see a price decrease of $25 per year, or just over $2 per month.’’

Across New Zealand the user-pays proposal was expected to deliver a modest price decrease for consumers in 28 out of 29 local network areas, he said.

The Electricity Authority board is now considering the submissions. A decision is expected this year, possibly as early as next month (April).

Mr Shadbolt urged the authority to “get on and make a fair decision.”

Media Release 15 March 2017.