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Disputed transmission pricing proposals on slow track

Wednesday 5th June 2013

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Controversial proposals to overhaul how to share the costs of the national electricity grid will no longer be pursued with such urgency, although they remain one of the Electricity Authority's top 10 priorities.

EA chief executive Carl Hansen told a media briefing the transmission pricing methodology project would now extend beyond 2013.

When first announced last October, the regulator thought it had cracked a two decade-long argument over how the costs of the grid, which are rising owing to recent multi-billion upgrades.

However, strong industry opposition to the proposals saw a three day closed door conference last week and a delay in the project signalled in the EA's annual Statement of Intent.

The issue could have major impacts on generators, especially in the North Island, who have not previously had the same exposure to grid costs as South Island generators. An annual cost as high as $65 million a year was imputed for recently listed MightyRiverPower, with one analyst placing this risk as a higher threat to MRP's earnings than the Labour and Green parties' central planner power policy.

"With the transmission pricing methodology, because we've embarked on quite a different tract with more policy development work there", the initiative was unlikely to reach a conclusion this year, said Hansen.

That had lowered it to a Level Two issue, despite remaining a top priority.

The EA would be issuing further discussion papers on the issue and was considering major new questions such as whether it was correct to treat the grid as a "sunk cost" when it was possible for parts of it to be moved to other uses.

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