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Subsidy removal to save consumers $300m

NZN 5/12/2016 Sean Martin

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 $300 million a year.

The decision follows the High Court's rejection of a bid by Infratil-controlled Trustpower, to force a judicial review of the authority's approach to the pricing of so-called distributed generation.

Four of the main power companies - Trustpower, Meridian, Contact, and Genesis Energy - which own around two-thirds of the 1500 megawatts of installed distributed generation capacity available in New Zealand will feel most of the impact of the authority's move.

Operators had been able to claim 'avoided cost of transmission' 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 revenues flowing back to distributed generation owners in the last eight years, said the authority's chief executive, Carl Hansen.

In some cases, such as the lower South Island, it was actually adding to the pressure to spend money on upgrading the grid because the new plant was being installed in areas where there was excess electricity generation capacity already, which had to be exported out of the area,

However, the authority has not gone as far as its original proposals, reducing the cost of the proposals to owners by some 55-to-75 per cent, said Mr Hansen.

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