Election 2020: National would push Transpower to cut prices to Tiwai Point smelter

The owners of the Tiwai Point aluminium smelter have signalled plans to close in August 2021, but negotiations with the Government are continuing. Photo / Gregor Richardson

National has indicated it will push Transpower to strike a deal which would keep the Tiwai Point aluminium smelter open beyond next year.

On Friday Opposition leader Judith Collins travelled to Invercargill to announce National's position on the smelter, with which it has had a difficult relationship over the past decade.

"A National Government will facilitate negotiations between Rio Tinto, power companies and Transpower to achieve a more cost competitive environment," Collins said in a statement.

"Our aim is to create a commercially viable outcome that would keep the smelter in operation for at least the next five years while preparing Southland to lessen the severity of the smelter's hard-closure."

While National's announcement does not spell out how it would achieve a deal, the statement strongly hints it will require pushing Transpower, a state owned enterprise, to agree to cut its prices to the smelter.

Rio Tinto has long argued that it pays too much for transmission pricing. Despite being close to Manapouri, the power station which supplies all of its power, the mining giant says it pays a major chunk of the entire cost of the transmission network by virtue of the fact that it is New Zealand's largest electricity user.

But so far its calls for cheaper transmission have not led to the reductions it is calling for and the Government is unlikely to force the issue from the body which sets the rules.

Transmission pricing is determined by the Electricity Authority and as Energy Minister in 2017 Collins said the Government could not intervene in the price setting process because the regulator is an independent Crown entity.

However Transpower, the owner of the national grid, is 100 per cent owned by the Crown, so minister's could work a way to direct its operations.

Collins said National understood Meridian Energy, owners of the Manapouri Power Station "have offered a positive electricity price for Rio Tinto" based on the losses it would face if the smelter was to close next year.

National said it would "do more" to secure a deal.

"A major factor is the cost of electricity carriage charged to the smelter by Transpower and National will want to see the current transmission price path negotiated to a point the smelter can commit to a future beyond the proposed hard-close date," Collins said.

"In exchange for this deal, we would require a plan from Rio Tinto for the clean-up of the site and dealing with the waste when it closes."

Collins' statement comes as talks between the Government and Rio Tinto appear to be continuing.

When the smelter announced it was to close, Energy Minister Megan Woods and Finance Minister Grant Robertson described the announcement as "final".

However Woods has confirmed talks are still ongoing.

"There are a range of discussions taking place but they are all commercial in nature so I won't be going into any detail about them."

In February the Herald revealed that Woods had offered to assist Rio Tinto to build its case for a discount on its transmission pricing and had facilitated a meeting between the sector and Rio Tinto.

Rio Tinto said this week that it continued to push the Government "for a fair price on transmission which reflects the actual service we receive at Tiwai," the company's managing director of Pacific operations, Kellie Parker, said in a statement.

"Rio Tinto needs a fixed and fair price so we don't continue to lose money over that longer timeframe. In the short term we really need to provide certainty for our people and our community, as soon as possible."

National's statement marks a significant shift for the party which has had a difficult relationship with the smelter's owners for close to a decade.

Back in 2013, as the former National Government was seeking to partially sell off Meridian through an initial public offering, Rio Tinto threatened to close the smelter.

National was forced to write the owners of the smelter a $30 million cheque to remove the uncertainty over New Zealand's largest electricity producer, which has the bulk of its generation from hydroelectric schemes in the lower South Island.

Finance Minister Bill English warned the smelter it was a one time only deal.

While Rio Tinto is already liable for the clean-up costs at Tiwai Point, National says in exchange for cheaper transmission it would need to do more. "We would require a plan from Rio Tinto for the clean-up of the site and dealing with the waste when it closes," Collins said.