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Electricity grid pricing due out

NZ NewswireNZ Newswire 11/04/2016 Pattrick Smellie

A long-awaited recommendation on how the cost of the national electricity grid should be shared is due out next month.

The Electricity Authority says it will release its transmission pricing methodology paper on May 17 and run an eight-week consultation period.

The issue has been running for years without resolution and revolves around whether South Island electricity generators and consumers pay too much for access to the grid.

It comes after $2 billion of upgrades over the past five years which have delivered a significant improvement in security of supply for North Island consumers.

Whatever the outcome, there are likely to be economic and political consequences.

The Rio Tinto-controlled aluminium smelter at Tiwai Point regards grid costs as an important input into deciding whether to keep the smelter running at full capacity, drop around a third of its production, or pull the plug on its New Zealand operations.

Those decisions, in turn, have flow-on impacts for the electricity system.

Reduced demand from the smelter would add to the current glut of electricity production, which has been pushing down the price of wholesale electricity in recent years.

However, a decision favourable to the smelter would also be likely to mean higher grid connection costs for North Island consumers, including Auckland, and for remote areas such as the West Coast of the South Island.

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