8 Mar 2017

Steelmaking threatened by power charges - NZ Steel

12:50 pm on 8 March 2017

New Zealand Steel is repeating its warning that high prices for electricity transmission could make it impractical to stay in business.

no caption

Photo: 123rf.com

It could even contribute to the closure of the steel industry in New Zealand, it says.

The comments come in the wake of refined proposals to change the way people and companies pay for the national grid the 12,000km network of high voltage wires that carry power throughout the country.

It costs $918 million a year to run, and at present that money is paid as a percentage of everyone's power bill.

The Electricity Authority wants to change that so people who have benefited from expensive improvements in the grid - such as people in Auckland - pay for more than they do now.

People who have not had expensive upgrades to their system would pay less.

That means prices would rise more in the upper North island because of costly work such as last decade's controversial Whakamaru to Otahuhu power line.

Transmission pricing still not good enough - NZ steel

NZ Steel, which turns ironsands into high quality steel at its plant in Glenbrook, faces price increases.

Last year, NZ Steel warned it faced stiff competition from steel makers in places like India, and had cut production costs by $70m as a result.

Since NZ Steel made that statement, the Electricity Authority has refined its transmission pricing proposals.

But in a new submission, NZ Steel said they were still not good enough.

"The significant cost increase that would result (from the Authority's proposal) would be a massive setback for the case to keep steelmaking in New Zealand," a senior NZ Steel executive, Matthew Kari, wrote in his submission.

"It could ultimately contribute to its closure."

NZ Steel uses locally-sourced iron sand and coal to produce about 600,000 tonnes of steel slabs a year.

It recently acquired the rival steel company, Fletcher Building's Pacific Steel Group.

'Death by a thousand cuts' - Norske Skogg Tasman

Also unhappy is Kawerau's historic pulp and paper mill, which warned last year that the proposed transmission changes could produce a bill twice as high as the previous year's entire profit, and could cause a shutdown.

In its new submission, the mill's owners, Norske Skogg Tasman, accused the authority of not dealing adequately with previous submissions.

It commercial manager Susan Flay said the Authority had modified its proposals, but Norske Skogg Tasman still faced what she called "death by a thousand cuts".

"The proposal has considerable implications for the future of our business," Ms Flay wrote.

"We would like to see the Authority engage more effectively with submitters and take account of expert advice presented in those submissions."

Pacific Aluminium has also criticised the latest proposal, saying the Tiwai Point aluminium smelter's transmission costs were due to rise to $70 million a year, despite using less than two percent of Transpower's wires.

The company also chided the Authority for taking too long to resolve the matter, citing a letter written in 2006 about transmission pricing, which is still not resolved.

Other submissions came from local councils, including those in Northland who argued the changes would still put a big cost on low income communities in the region.

But organisations in Southland are generally pleased with the proposals for change.

Venture Southland argued that transmission prices had risen 330 percent in the South Island, 225 percent in the lower North Island and 40 percent in the upper North Island - to pay for transmission improvements in the upper North Island alone.

Venture Southland said New Zealand as a whole would be at least $200m a year better off because the changes would make use of the national grid more rational.

Get the new RNZ app

for ad-free news and current affairs