Consumers should enjoy lower electricity prices with a multi-million dollar upgrade to the high-voltage electricity link between the North and South Islands, the electricity industry says.

But Transpower, which is undertaking the upgrade, said while prices will eventually be lower, consumers shouldn't look for a cheaper power bill next month.

The latest upgrade to the Cook Strait electricity link, Pole 3, will come into effect tonight.

It replaces the 47-year-old Pole 1, which was decommissioned last year after running in restricted mode since 2007.


The $672 million project will allow up to one thousand megawatts to be transmitted between the islands - increasing capacity by about a third.

The Electricity Network Association's chief executive Alan Jenkins said before the upgrade getting power from the South to the North Island had always been constrained at peak times.

The more reliable and increased supply should reflect in cheaper power prices for consumers, he said.

"As soon as you take away supply constraints it seems to help markets.

"It will mean additional costs for Transpower, but not a huge lot.''

In future the savings from reducing cost increases that the public would have faced if the upgrade had not gone ahead were "significant'', Mr Jenkins said.

Business NZ Energy, Environment, and Infrastructure manager John Carnegie said with Pole 3, he expected prices would be more "efficient''.

"It means that businesses and consumers can benefit from the lower cost hydro generation in the South Island if it's being transferred north.''

Transpower chief executive Patrick Strange said over the "lifetime'', there would be lower prices than if the upgrade had not happened.

"But that doesn't mean to say charges are going to go down tomorrow.''

Without the upgrade, prices over the next 20 to 25 years would be higher, he said.

Energy Minister Simon Bridges said Pole 3 was a "key part'' of the national electricity transmission grid which would help ensure New Zealand makes the best use of its energy resources throughout the country.

"For example, Pole 3 will make it easier to get electricity from the existing hydro-generators at the bottom of the South Island to areas of high demand like Auckland.''

The improved capability to transfer power between the islands would have "significant benefits'' for the electricity market, making it more efficient and helping ensure security of supply, Mr Bridges said.


By the numbers:

* total approved cost - $672 million;

* capacity of new Pole 3 - 700 MW;

* capacity of Pole 2 - 700 MW;

* capacity of Pole 1 when retired last year - 250 MW (north transfer only);

* total capacity of the link by end of 2013 - 1200 MW;

* key equipment contractor - Siemens;

* 2.3 million hours worked;

* about 3000 staff and contractors involved;

* construction duration: 3 years 6 months.