Tests revealing faultlines along the proposed route of a hydro-electric tunnel on Canterbury's Waitaki River have sparked a redesign of the power project.

Meridian Energy was last month granted consent to use water from Lake Waitaki for its proposed $1 billion North Bank Tunnel project - a 12-metre-wide, 36km-long underground tunnel providing electricity for 175,000 homes in Otago and Canterbury.

However, the plans hit a snag when tests recently revealed issues with the geological structure along the central part of the tunnel's proposed route along the lower Waitaki River.

"The composition of the rock would propose challenges, and also there were some faultlines that would cause some issue as well," Meridian spokeswoman Claire Shaw told NZPA.

"Drilling around faulted rock just makes the process of actually digging this full tunnel more difficult. It would take longer, it might be harder, there'll be lots of different risks associated with it."

The company has proposed an alternative design, replacing the midsection of the tunnel with a 13km-long canal.

Shaw said it was too soon to tell whether the redesign would end up costing more.

"We've always mooted it as a billion dollar-plus project, and until we have the final design, and, to be honest, until it's built, it's very, very difficult to give a cost."

The company was in the process of discussing consent issues with landowners, said Shaw.

"We're concentrating on letting the landowners absorb the information we've given them, and we'll be waiting to hear back from them, so it's very early days yet."