South has its say on transmission pricing

Supporting northern infrastructure has become the norm for Southerners but not without resistance as Southlanders have their say on the pricing of electricity transmission.

Invercargill Mayor Tim Shadbolt is applauding the efforts of the Electricity Authority to provide a fair deal for electricity customers in the lower North Island and South Island. The Mayor is also applauding the efforts of Southern submitters who have forwarded their respective cases to the Electricity Authority in the hope of a quick correction of what is being seen in the South as a “gross injustice”. “Eight years of consultation is enough, it is now time for action,” he says.

Southern electricity customers have borne the brunt the $1.3 billion of grid investment in the upper North Island (commissioned since 2004) and these customers have seen increases in transmission charges of:

• 330% in the South Island
• 225% in the lower North Island
• 40% in the upper North Island.

Only 39% of that investment is being paid for by the upper North Island and the remaining 61% of these improvements is paid for by increased transmission costs in the lower North Island and the whole South Island.

Mr Shadbolt said, “the current Transmission Pricing system adds insult to injury when you consider that 50% of all of New Zealand’s Renewable Generation is produced in the lower South Island. Common logic would suggest that as less infrastructure is being used to support South Island consumers, then there may be a price advantage to those residents and industrial users close to the generation. But no! Those close to major generation are paying the lion’s share of getting that power to Auckland. This is a joke.”

Invercargill Mayor Tim Shadbolt“It gets unbelievably even worse. At a time when New Zealand is striving to increase the level of renewable energy opportunities, to reduce carbon emissions, new South Island generation investments are being scrapped because South Island generators alone are having to pay for the Cook Strait cable. This situation cannot be allowed to continue and the Electricity Authority should be allowed to make a determination on transmission pricing that reflects the true cost of transmission to consumers,” Mr Shadbolt (pictured) said.

The Authority’s proposal will see that only the parties that benefit from electricity infrastructure upgrades will pay for them. Any upgrades of the South Island grid will not be paid for by North Islanders and vice versa.

Mr Shadbolt said, “it’s not surprising that the major beneficiaries of the current, unjust system have created a major storm of disapproval. It is about time that all consumers paid their fair share.”

“If Southern money is once again required to prop up the cost of living and business operations in the North – which incidentally is also the case for transport – then all I can say is that Auckland and Auckland businesses are basket cases, which is clearly not true.

“Unfortunately this is exactly what people like the Chief Executive of the Employers and Manufacturers Association. Mr Kim Campbell is promoting. Incidentally, his line is completely at odds with EMA’s sister organisations further south. He is effectively saying that the answer is that Southern business should subsidise Auckland business, how does this approach fit within a free market, user-pays economy?”

The Electricity Authority says that paying a fair share of the costs of improving the Transmission in Auckland will see some modest increases in costs for customers in Auckland and other parts of the upper North Island.

The increase for household customers on Auckland’s Vector network is calculated by the Electricity Authority to be $66 per year or $5.50 per month. What is more, this increase won’t come in until 2020, by which time the Electricity Authority expects that it will be more than offset by reductions in the regulated level of profits that the grid owner and network companies like Vector are allowed to recover from their customers. This means Auckland customers are actually expected to see a price decrease of $25 per year, or just over $2 per month.

Across New Zealand the new proposal is expected to deliver a modest price decrease for most of the population. Taking into account reductions in the regulated level of profits, 28 out of 29 local network areas should see a price decrease when the changes come into effect in 2020. So while a minority of customers and businesses may see a modest increase, most New Zealanders will see a decrease.

Mr Shadbolt said, “I have a soft spot for Auckland and the people of Auckland, having lived there a majority of my adult life. However, the proposed reforms to Transmission Pricing are long overdue and in spite of minor cost increases for upper North Island consumers, the Electricity Authority must act and act quickly to correct the unfair subsidisation of energy costs in the North by consumers in the South. These currently unjust policies are undermining regional economic development in the lower North Island and the South Island.” He is urging the Electricity Authority to “get on and make a fair decision”.