Northland power users may save from 2019

Northland power users may get a slice of between $25 million and $35 million in estimated savings if subsidies for generators connected to electricity networks are removed.

The Electricity Authority this week announced Transpower would analyse its grid operations throughout the country, beginning with the lower South Island first, before advising the authority whether the situation should remain or change in terms of subsidies.

If the national grid operator is of the view generators are helping distribute power in some or all areas, the Avoided Cost of Transmission (ACOT) subsidy will remain.

Under the current rules, consumers are subsidising the owners of distributed generation and over the last eight years, the rate of ACOT has increased by 79 percent nationwide.

Power users are paying the subsidy as part of their electricity bills.

The authority said power consumers throughout New Zealand would save between $25 million to $35 million per year if the subsidies were removed in all regions but could not provide the estimated savings for Northland.

However, authority chief executive Carl Hansen hinted Far North power users in particular- already paying some of the highest electricity charges in the country- would benefit if Top Energy's two new geothermal power plants at Ngawha Springs contributed to the grid supply.

The plants will boost Top Energy's output from the current 25MW to 75MW.

ACOT subsidy came into effect in 2007.

Mr Hansen said if the authority approved the removal of subsidy for the upper North Island, the change would come into effect from April 1, 2019.

The change in the lower South Island, if approved, would be effective an year earlier.

"Transpower will do what's called a Grid Reliability Support which they do every two years.
The subsidies will either stay the same or go down but we're not in a position to say that until that analysis by Transpower is done," Mr Hansen said.

Overall, he said ACOT generated $60 million in revenue and a general indicative analysis done by the authority in 2013 reckoned savings of between $25 million and $35 million for all power users.

Mr Hansen said perversely the more transmission capability there was, the higher the rate of ACOT subsidy under the current rules.

Another perverse feature was the current rules encouraged distributed generation to be built in locations that increased future transmission costs rather than avoid transmission costs, he said.

According to Consumer Powerswitch, Northland households shelled out $11.5 million more for power in the year to October 2016 by not switching to the cheapest provider.