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Transpower defends national grid bottleneck claims

By Rob Hosking

Friday 23rd June 2000

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Transpower is defending itself over criticisms that a power generation bottleneck at Taupo is causing problems with Auckland's power supply and costing consumers.

Recent years had seen additional power generation built north of Taupo, Transpower chief executive Bob Thomson said.

"That has resulted in a dramatic fall in the frequency of the constraint in capacity," he said.

"Auckland consumers are gaining the benefits of local generation that is lower priced, and overall the electricity system is more secure because of Otahuhu B being built."

Transpower could not act unilaterally to hold prices down, Mr Thomson said. "If a constraint affects the security of supply, we'll fix it. But if it affects the price it is left to the market. The market has to tell us to do it.

"We do look at net national benefit but we don't publish that because we're a monopoly and we have to be careful of the Commerce Act."

Transpower also takes issue with an estimate that the bottleneck had cost consumers $300 million over six years.

There was a bottleneck at Taupo, Mr Thomson said, but if that were fixed the constraint would simply move down the chain to Bunnythorpe.

"It's not a simple problem. The transmission network is not a large European type network. It does the job, but it's tight."

There were transmission constraints at Taupo but these were "only a few minutes a day," he said. "I don't want to get into figures but it's nothing like $300 million.

"And, when the Otahuhu B station is running, there aren't any constraints on Auckland's power supply."

Transpower had adopted a nodal pricing model, which reflects the losses in the network, he said. The aim of this was to create incentives for generation companies to build capacity closer to the demand.

"This has worked, with the new station at Southdown in Auckland. The cost curve for small generation is coming down, and as the electricity inductry report said, we're going to see smaller distributed generation plants being becoming more common."

For Transpower to take on board Mr Leyland's approach would be effectively a return to central planning - in this case decisions on Auckland infrastructure being made in Wellington, Mr Thomson said.

"There are long-term security of supply issues in Auckland that need consideration. Transpower's approach is to work with its Auckland customers and other stakeholders on developing solutions that meet their needs and are economic.

We don't make the presumption that a transmission solution is the only possibility."

Last week The National Business Review erroneously suggested electricity consultant Bryan Leyland, of Sinclair Knight Merz, had criticised Transpower's management of electricity transmission north of Taupo.

Mr Leyland was in fact criticising the market regime Transpower works under, and not Transpower itself. The story also incorrectly suggested Transpower could get southern generators to spill southern lakes.

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