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Electricity Authority softens reform ideas

NZ Newswire logoNZ Newswire 12/12/2016 Pattrick Smellie
Electricity pylon © Getty Images Electricity pylon

The Electricity Authority is softening its proposed reforms for national grid payments.

It is also suggesting that even where its proposals raise power prices, other reforms under consideration by the Commerce Commission will mostly cancel them out.

However, even then, the contentious transmission pricing methodology (TPM) proposals would still raise power prices for several major industrial plants in the North Island after 2020, including New Zealand Steel, which continues to review the viability of its New Zealand operations, including the Glenbrook steel mill south of Auckland.

Where earlier versions of the proposed reforms threatened to deliver annual power price increases of several hundred dollars per household in some parts of the country, including the West Coast and the Far North, as well as large increases in Auckland, the latest proposals limit increases to no more than 3.5 per cent of a customer's total energy bill in the first six years of the proposed new regime's operation, from 2020.

The updated proposals were published on Tuesday for a further round of consultation, following criticism from national grid operator Transpower that the proposals released in May were overly complex, and furious lobbying against increased charges led by the Auckland arm of Business New Zealand, the Employers and Manufacturers Association.

A key point of friction has been the cost of transmission for Pacific Aluminium's smelter, at Tiwai Point at the bottom of the South Island.

The Rio Tinto-controlled smelter has made clear that its continued operation in New Zealand partly rests on making substantial savings on its current transmission costs.

The proposals remove a previous proposal giving the national grid operator, Transpower, discretion to apply "prudent discounts" in cases where grid price rises caused an industry to cease operation in New Zealand. It also rejected Transpower's proposal to take a staged approach to the TPM reforms.

However, the latest proposals would give Transpower greater discretion in how the charges are designed region by region.

Consultation on the refinements closes on Feb. 24 next year.

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