North Island may pay more, South less for power

7:26 pm on 17 May 2016

People in the north of the country will pay more for their power and most South Islanders will pay less under proposed changes unveiled by the Electricity Authority this morning.

Photo: RNZ / Diego Opatowski

The proposed Transmission Pricing Methodology would mean a shift away from a 'one size fits all' approach to charging for electricity transmission.

Most South Island consumers would pay less and those in the North Island would pay more of the overall cost of power transmission.

At present, consumers pay an equal share of the cost of running the national grid; they pay the same whether they live at the far end of a 1000km power line or just down the road from a hydro dam.

The Electricity Authority has long believed that people who benefit most from a service should pay the most for it, and that cross subsidies can hinder investment.

Last June, the authority produced a paper saying reforms could produce better efficiency by providing incentives so that the right investments occurred at the right time, and in the right place.

That paper was opened up to submissions, and the Electricity Authority's response to them was released today.

The transmission charge accounts for about 10 percent of power bills.

Auckland, Counties Manukau, Northland, the Far North are regions around the country that will be hit with high prices.

Ashburton and parts of the West Coast are two South Island regions among those that could expect price increases, starting at about $50 a year per household.

But in 15 regions, power bills would go down.

Electricity Authority chair Brent Layton said increases in areas like Auckland reflected recent upgrades.

"In Auckland, they now have good reliability of service which means that if not just one, but two major transmission assets go out and a generator goes out, they will still have supply in Auckland.

"If you go to somewhere like (the) south of the West Coast, one asset going out will lead to a loss of supply, so the reliability being paid for by everybody is not being delivered on an equal basis."

The Tiwai Point aluminium smelter near Bluff, the country's largest single user of electricity, will get a $20 million reduction, a figure that could increase if the company is able to convince the authority a bigger reduction is in New Zealand's interests.

In an earlier proposal released last year the authority indicated a reduction of up to $50m.

The authority said the discount reflected the amount of electricity the smelter uses. It said if it closed, transmission charges for all consumers around the country would go up 11 percent.

Apart from the anomalies of Ashburton, Waitaki and two West Coast towns, most South Island consumers will save money from the changes.