Someone needs to end this electricity nonsense
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 rejigging.
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.