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King Country Energy attack grid charges

NZ NewswireNZ Newswire 26/05/2016 Edwin Mitson

King Country Energy, the central North Island power generator and retailer, has warned the Electricity Authority's planned overhaul of grid charges would both increase prices for its customers and leave it with little incentive to invest.

On May 17, the Authority published a consultation paper on transmission pricing to replace the current two main charges - $150 million a year for the HVDC link between the North and South islands and an interconnection charge of $639m a year, with two new charges: an area-of-benefit (AoB) charge of $296m and a residual charge for Transpower's costs of $500m a year, spread across the country.

Consumers in Auckland and the Far North of the North Island would face the biggest increase in costs under the proposals because they have received the most benefit from recent upgrades to the electricity grid.

A final decision on the proposals is due in October, with the aim to have the new regime in place by 2019.

King Country Energy has around 18,000 customers in the Waikato, around 75 per cent of the market for the area.

It owns and operates a 45 Megawatt hydro system incorporating four power stations in the King Country and another power station in the Manawatu.

Chief executive Rob Foster said his company had contributed to the consultation process but the outcome "blatantly ignores KCE's concerns" and would ultimately lead to its customers paying more.

A particular issue is the proposed abolition of the avoided cost of transmission payment (ACOT), which delivers around $158 per customer to King Country Energy. The payment is made to generators who supply homes and businesses through local lines which are not directly connected to Transpower's network, avoiding the cost of transmitting on the main grid.

Foster said the removal of this payment would have a major impact.

"If this proposal goes through, distributed generators will be dependent on Transpower's perspective of their worth, and quite simply, that means the Electricity Authority has handed responsibility for the status of distributed generation to the grid operator," he said.

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