Reprieve from Northland power price hikes

A plan to bump up the cost of power in Northland is on hold after the report it was based on was found to be riddled with errors. PHOTO / FILE

A government agency has suspended electricity reforms which would have hiked Northland power prices and could have cost the region jobs.

The Electricity Authority (EA) has rejected an Australian firm's cost-benefit analysis on which its reform plans had been based after finding a series of glaring errors.

The geographical and mathematical blunders included analysis based on the misunderstanding a possible new power station was in Rodney when it was in fact in the South Island.

The analysis also mistakenly located Hawke's Bay, Waikato and Wairarapa wind farms in the South Island, and overstated the Far North's power consumption by a factor of 10.

If the power price reform had gone through as originally proposed, line charges for Far North households could have gone up from $155 to $421 a year, and from $300 to $560 in Whangarei/Kaipara.

The EA said it was still committed to reforming the country's transmission pricing system, but needed a new cost-benefit analysis.

The previous analysis was sent back to Australian consulting firm Oakley Greenwood in February with orders to fix a series of errors, but later even more errors were found.

The EA declined to say how much the abandoned report had cost.
However, it did say it was much less than 0.5 per cent of its annual budget. With a budget of $77m that means the report cost less than $385,000. Advocate sources put the cost at about $250,000.

EA chief executive Carl Hansen said the agency was considering trying to get back the money it had paid for the abandoned analysis.

He expected the new cost-benefit model would be ready late this year or early 2018. Any changes would be implemented by April 2020.

NZ First leader and Northland MP Winston Peters said the changes would have added $500,000 a year to the power bill at Juken NZ timber mill alone, Kaitaia's biggest employer.

Cost increases on that scale could be enough to "tip some industries over the edge".

In total the changes would have added $10.6m a year to Northland power bills, Mr Peters said.

The proposed price reform was cited by industry players as the main reason why a concept for a $300 million pulp mill at Ngawha, near Kaikohe, did not proceed.

Earlier the union E Tu said jobs could have been put at risk at the LVL mill at Marsden Pt, Golden Bay Cement at Portland and Fonterra plants at Maungaturoto and Kauri.

Mr Peters was quick to claim credit for the EA "back flip", saying it had come about as a result of his party's pressure.

"The EA has only been made to kick this proposal into the long grass of 2018, which, of course, is post-election."

Far North Mayor John Carter welcomed the EA's announcement. Its proposed pricing reform had put at risk plans by Top Energy to expand its power station at Ngawha, which would make the Far North self-reliant in electricity, as well as plans for an industrial park bringing much-needed jobs.

The aim of the EA's Transmission Pricing Methodology review was to shift the cost of transmission line upgrades to the areas that directly benefited. Consumers close to the major power generators in the South Island would pay less for electricity and more distant areas, such as Northland, would pay more.

Mr Hansen said the current system was not durable and encouraged wasteful investments, resulting in higher prices for consumers.

In particular the "game-changing" development of large-scale batteries meant reform could not be delayed for long.

A coalition of power firms led by Trustpower, including Northpower and Top Energy, have been fighting the proposals for a number of years, but were only allowed to see the numbers behind the flawed cost-benefit analysis a day before the last consultation round closed.