Govt unlikely to intervene in transmission pricing

Transmission prices account for about 10 per cent of a household power bill. Photo / 123RF

The government appears unlikely to intervene in planned changes to the way electricity transmission costs are allocated.

The electricity price review completed last year had recommended the government issue a policy statement on transmission pricing, given the potential for wealth transfers between customers of different regions and the need to cut-through a divisive and protracted process.

Energy and Resources Minister Megan Woods said she is taking advice on the need for a policy statement, but she noted that most of the issues raised in the review had been considered between last year's draft transmission proposal and the final decision issued by the Electricity Authority last week.

The policy statement suggested by the review was not intended to start the whole process off again, Woods said, adding that the authority's work on transmission pricing had now traversed three successive governments.

"We are better to leave this as a technical piece of work rather than a political piece of work and I think that probably all of us would share that view," Woods told Parliament's economic development, science and innovation select committee yesterday.

Transmission prices

Transmission prices – charged to cover the cost of national grid operator Transpower – account for about 10 percent of a household power bill. The changes planned by the authority would take effect from 2023 and would tend to increase costs for upper North Island households, generators and major industrial customers, but reduce costs for South Island generation.

Electricity Authority chief executive James Stevenson-Wallace said the country has a huge opportunity to expand its renewable energy production in coming years and the transmission pricing change is a "big reset" to help enable that.

Getting the right price signals for when and where to build generation – be it wind, hydro, geothermal or gas-fired peaking plant – would be critical, he said.

"It's about the longer-term competitive investment that lowers the long-term cost to consumers."

Woods noted that while some consumers would face a higher share of transmission costs, others would benefit from reductions. Falling interest rates, which reduce both transmission costs and the charges of local lines companies, meant that overall electricity costs were falling.

Government data published yesterday showed that residential power costs averaged 29.11 cents a kilowatt-hour in the year ended March. That was down 1.8 percent from the year before after allowing for inflation and the third straight annual decline. Most of that fall was due to lower lines charges.

Importance of affordability

Affordability was a big focus of the electricity review, which was pledged going into the 2017 general election.

Woods said that while the electricity market works well for a large proportion of the community, it was still not delivering for all consumers and efforts would continue to improve that.

She noted that the authority had just issued default industry agreements intended to reduce costs in the sector. A default distribution agreement should lower costs for new entrant retailers and make it easier for them to sell their power in more parts of the country.

A default data agreement should also make it easier for lines companies to access some customer data from retailers to help improve the management of their networks and provide a more efficient, cost-effective service.