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Lobby group calls for independent review of electricity pricing reforms

Thursday 6th October 2016

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An independent external review and better processes are needed before the Electricity Authority proceeds with the latest reform of how the national grid is paid for, says a group of consumer trusts, businesses, farming, local government and electricity sector participants.

The group includes the Ashburton District Council, the Auckland Chamber of Commerce, Counties Power and its consumer trust, EA Networks, EMA Northern, Entrust, Auckland Federated Farmers, Northpower, Norske Skog, New Zealand Steel, Top Energy and Vector.

The authority’s board met in Wellington yesterday to decide on its transmission pricing methodology proposals. Published submissions on the proposal revealed fresh divisions over how to ensure the costs of the wires that carry electricity from power stations to all parts of the country are allocated fairly, with objections largely resting on whether the submitter's region would be better or worse off.

Submissions were roughly two to one against and that’s why independent international experts are needed to review the authority’s work, especially the cost-benefit calculations, said group spokesman Kim Campbell, chief executive of the Employers and Manufacturers Association, which is spear-heading opposition to the proposals, which would raise transmission charges to the north of the North Island, where billions of dollars of upgrades are providing benefits to consumers in Auckland and further north.

“If the authority is confident in the quality of its analysis, it has nothing to fear from an independent review. And if there are problems, then we’ll all be spared a restructuring that could rival the Bradford reforms for controversy," he said, referring to the reforms in 1998 that split the competitive provision of retail electricity services from the monopoly-owned local owners of electricity networks.

The group wants all parties brought together in a working group and cross-submissions to achieve a lasting consensus which the present “propose-respond” approach won’t achieve, Campbell said.

It’s also calling for the government to separately commission a wider review of the proposals to include social and economic impacts, given the authority’s narrow mandate to look at the efficiency of the electricity system only.

The authority’s own data shows consumers connected to electricity lines companies in the gun will be worse off to the tune of $115 million a year, while those connect to lines companies that benefit will only be $46 million ahead. One major beneficiary would be the Tiwai Point aluminium smelter, owned by Australian metals giant Rio Tinto, while Australian-owned NZ Steel, south of Auckland, would be a net loser.

State-owned grid operator, Transpower, suggested in its submission an alternative “simplified, staged approach” to resolve the long-running impasse and said it doesn’t believe the EA’s proposals can be implemented by April 2019, as proposed.

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