The Government has not ruled out intervening in the electricity market after a review of transmission pricing method will see power users in Northland paying some of the highest charges in the country.
Following the Transmission Pricing Methodology (TPM) review that spanned 12 years and three governments, the Electricity Authority (EA) last week released new guidelines on how Transpower can recoup the cost of operating and maintaining the national grid.
The new guidelines, EA says, will reduce electricity cost at peak times, encourage the right investment in renewable generation, and contribute to a low emissions economy.
Based on the EA's figures, Northpower's transmission charges from Transpower will initially increase by $1.4 million or on average about $24 per household annually.
Each household in the Top Energy network will pay about $43 more a year in transmission charges.
The Transmission Pricing Group which consists of lines companies and related stakeholders is calling for a government policy statement that would make the authority consider the impact of its decisions on local communities that are facing energy poverty.
This would align with the Electricity Price Review Panel's advice to the Government that "the question of whether and how much transmission pricing changes should affect users or regions is best settled with clear guidance from elected governments", the group said.
Minister for Energy Megan Woods said the TPM review was designed to ensure fairness of pricing and that there was no perfect solution to transmission pricing that would satisfy everyone.
"As minister, I am interested in the overall fairness and workability of the electricity system and whether there are good outcomes for the nation as a whole.
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"The option of a government policy statement is something I am seeking advice on, including the extent to which the Electricity Pricing Review panel's final recommendations have already been applied in the pricing methodology," she said.
Northpower general manager network Josie Boyd said Northlanders would likely suffer much steeper future increases as we bore a share of the costs of any new transmission investments and asset upgrades across New Zealand that might be deemed to benefit Northland.
"These future costs cannot be reliably forecast and the EA themselves are unable to quantify the long term potential impacts.
"However, it is reasonable to assume from the EA's methodology, that those in more remote locations, served by older assets such as Northland will face a higher proportion of future costs than is currently the case."
Authority general manager market design Rob Bernau said transmission pricing was contentious and there was no single option that would deliver a consensus.
He said the EA's decision focused on benefits to all consumers, not just individual parties.
"The authority's decision will lead to a rebalancing of transmission charges – some will have to pay more initially and some less.
"Any changes to electricity bills will be modest. The authority's decision protects consumers from big price increases with a price cap," Bernau said.
Under the current TPM, he said some customers were being overcharged at peak demand times for no good reason.
He said the peak charge was volatile and it over signalled the cost of using the grid – this volatility created uncertainty and has a negative impact on some customers.
"A new TPM will result in cheaper electricity prices over the long term as more accurate price signals encourage better investment in transmission, at the right place at the right time."
The EA's decision is separate to the Commerce Commission's final decision on the default price-quality path late last year on the maximum revenue 15 of New Zealand's regulated lines companies were allowed to earn and the minimum quality standards they must meet.
Under that ruling, lines charges for Top Energy customers will reduce by $348 a year and the reduction came into effect from April 1 this year.
Far North power users already pay some of the highest power charges in the country, lines that are uneconomical to run in some rural areas of the district.
Electricity distribution costs make up about a quarter of an average residential consumer's monthly bill.
Northpower was not subject to the default price-quality path.
The biggest power retailer in the country, Genesis with 18,000 residential, business, and industrial customers in Northland, said it has passed a decrease in line charges to their customers in the region.
The savings for each customer are dependent on their individual electricity usage and energy plan but bills will be reduced by 3 to 4 per cent.
Retailer Contact Energy did not specifically confirm whether a reduction in line charges have been passed on to its nearly 21,000 customers in Northland, saying its approach was to ensure its prices were competitive and delivered good value at all times.