13 Aug 2015

User pays for transmission 'a rort' - Peters

8:37 am on 13 August 2015

Northland MP Winston Peters is calling attempts to introduce a user-pays system for transmission prices "a rort".

Winston Peters giving his 2015 Budget speech.

Photo: RNZ / Alexander Robertson

A user-pays system is one of the proposals being considered by the Electricity Authority as it looks at changing the way the costs of the national grid are divided among power companies.

The authority believes the areas that benefit most from billion-dollar upgrades to the power grid should pay more than places which did not benefit.

One of the options being considered would increase power prices for some regions, up about 10 percent in Northland and on the West Coast, and 5 percent in Auckland and Marlborough.

Mr Peters did not like the idea.

"Their transmission pricing methodology for the regions is, frankly, a rort. We have got a staggering increase of 172 percent [transmission charge increase] for Northland. That's simply inexplicable."

But at the other end of the country, southerners said the change was long overdue.

Southland Chamber of Commerce chief executive Sarah Hannan said businesses in the region paid $64 million a year in charges for assets they did not use.

"If you look at the Tiwai smelter, they're paying around $50m in costs they receive no benefit for," she said. "They use very little of the grid infrastructure, and they pay about 8 percent of the total transmission charges."

North Island should pay - mainlanders

Editor of Energy News, Gavin Evans, said there had been talk of rejigging transmission pricing for a decade.

He said ongoing upgrades to the tranmission grid had bumped up the costs for everyone, with the North Island reaping most of the benefits.

"It doesn't really make sense for consumers in the South Island to be paying so much for these assets in the North Island."

He said it was an odd situation.

"If policy and industry structures don't logically make sense, it's probably a good reason to have a look at them."

Electricity Authority chief executive Carl Hansen said technology made it possible to see who had the greatest usage, so any price increases would be justified.

"If we did go ahead with it, it would be because those changes in charges reflect changes in the benefits that are flowing to different regions.

"There have been good upgrades that have benefited some regions more than others and the issue is: who should pay for the cost of that?"

The Electricity Authority was now reviewing the submissions and would publish another working paper early next year.