Axe falls on power station subsidy

The Electricity Authority is ending subsidies to power stations that are embedded in local electricity networks rather than connected to the national grid in a move the regulator says will save consumers around $25 million to $35m a year, or $279m on a net present value basis.

The decision, announced yesterday, follows last Friday’s rejection by the High Court of a bid by Infratil-controlled Trustpower to force a judicial review of the EA’s approach to the pricing of so-called distributed generation (DG).

At the same time, the authority announced it was delaying the release of the supplementary consultation paper on its hotly contested transmission pricing methodology proposals until next Tuesday, after discovering late on Monday that a key component required further work.

The delay is accompanied by a two-week extension of the deadline for submissions on the paper to February 24.

The impact of yesterday’s DG decision falls mainly on four of the main power companies — Trustpower, Meridian, Contact, and Genesis Energy — which own around twothirds of the 1500 megawatts of installed distributed generation capacity available in New Zealand.

Until yesterday, DG operators have been able to claim “avoided cost of transmission” (ACOT) revenues under a regime that was intended to reward the installation of plant that took pressure off the national grid.

However, the regime had produced “perverse incentives” and had contributed to a 79 per cent increase in ACOT revenues flowing back to DG owners in the last eight years, the authority’s chief executive, Carl Hansen, told a media briefing.

The concerns of small DG operators had been heard and there was still potential to earn ACOT revenues where Transpower judged DG plant genuinely relieved pressure on the national grid.

The decisions have no impact on solar rooftop generation at a household or small business level.