Far North power pricing submissions: “Please think again”

Media Release
Kerikeri, Wednesday 12 August 2015

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Far North electricity pricing submissions: “Please think again”

Top Energy and the Top Energy Consumer Trust have called for the Electricity Authority (EA) to go back to the drawing board over proposals that could see Far North communities facing electricity transmission increases of $266 a year, or 172 percent of current charges. These would result in power bills increasing by 10 percent overall.

The EA is consulting on proposed changes to the way electricity transmission is charged by Transpower. These changes will see the people of the Far North paying for investment that has gone predominantly into the electricity infrastructure of Auckland, Top Energy says.

“The EA basically proposes to treat the entire Upper North Island region as if it is all Auckland,” Mr Shaw said. “There appears to be little recognition of the fact that Far North communities don’t benefit from the investment that has gone into shoring up Auckland’s electricity infrastructure and that the people of our region simply can’t afford to subsidise Aucklanders.”

Top Energy has told the EA that the 10 percent overall increase in electricity bills would be a “devastating blow” to the economy of the Far North and become a barrier to economic development and investment badly needed in the region.

Top Energy believes it would be able to bypass the Transpower network and connect directly into the Northpower network for less than the additional $8m a year that Far North electricity customers would have to pay Transpower under the EA’s proposals.

“This would involve bypassing a viable and operational asset, and so isn’t an efficient use of resources,” Mr Shaw said. “This is a good example of how the EA’s proposals do not promote the efficient operation of the electricity industry for the long-term benefit of end users.”

Top Energy is surprised by the extent of modelling assumptions and judgements made in the EA proposals.

“Relatively small changes to any of these could lead to substantial shifts in costs between various parties,” Mr Shaw said. “This means that each modelling decision is likely to be debated and argued over, with potential for legal challenges. This does not enhance efficiency or make the proposed pricing methodology particularly durable.”

As an example of the shortcomings in the EA’s modelling, Mr Shaw points to how it estimates Top Energy consumers’ demand to be 660MW, or 25MW greater than the country’s largest electricity user, the aluminium smelter at Tiwai. Top Energy’s actual maximum demand has been measured at 65MW, or just 10 percent or the proposed figure.

“This makes a mockery of the proposed methodology, which would see Top Energy customers pay more charges than the smelter at Tiwai, despite it comprising a much larger proportion of national demand,” he said. “We just don’t believe such disparities can be justified. Allocation of charges between customer groups must be done on a consistent basis – failure to do this will lead to a pricing mechanism that has no credibility and undermine the durability of the methodology.”

Both the company and the Top Energy Consumer Trust are critical of the EA’s proposal to re-allocate the cost of national electricity transmission infrastructure that has already been built. In other words, making Far North electricity customers pay now for infrastructure that was built as far back as 2004.

The Top Energy Consumer Trust’s submission also focussed on the inefficiencies thrown up by the EA proposals, the complexity of the regulation it would create and, although less likely to be taken into consideration by the EA, the impact on the social and economic fabric of the Far North.

“Despite the EA attaching little weight to arguments of this nature we felt it was important that the points be made and that they should hear about the impacts these proposals will have on our community,” said Top Energy Consumer Trust Deputy Chair Hugh Ammundsen.

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