Transpower proposes new grid pricing review as regulator delays again

National electricity grid operator Transpower is proposing a fresh 'operational review' of the way power companies are charged for the cost of the grid as the sector's regulator, the Electricity Authority, announces further delay to its long-stalled full review of the Transmission Pricing Methodology.

EA chief executive Carl Hansen announced today that the regulator had decided to "postpone procurement of the new cost-benefit analysis" required in order to continue the TPM review after it revealed in April that a CBA it had been using for the previous year had serious computational errors and would require replacement.

The decision to postpone replacing the CBA work by Australian firm Oakley Greenwood was to enable recently appointed EA members "to get up to speed and fully understand the complexities of the TPM review and the process to date".

"This is likely to affect the overall timeline of the TPM review and the date of our decision about the TPM guidelines. At this stage the impact on the overall timeline is unclear. We will provide a further update on timing when we are in a position to do so," said Hansen.

The EA's previous timetable envisaged a new TPM being in place by April 2020.

The issue is important because of a long-running debate between users in different parts of the country about who should pay what for it. South Island users, including Meridian Energy and the New Zealand Aluminium Smelters operation at Tiwai Point, have long argued they should not have to pay for upgrades that have strengthened the grid's capacity in the upper North Island.

However, proposals that would have raised grid prices in Auckland and further north, among other areas, were hotly contested by upper North Island users, including the Employers and Manufacturers Association and New Zealand Steel.

Meanwhile, Transpower chief executive Alison Andrew said the state-owned grid operator had decided to conduct a second operational review of the TPM as it currently stands, having found a variety of improvements to grid charging in a review completed some 18 months ago, which freed up capacity for South Island generators to send electricity north.

At this stage, Transpower is seeking industry and consumer buy-in for the review.

"Any amendments would necessarily be moderate and incremental, allowing changes to the TPM (and transmission prices), and benefits for customers, sooner than if we wait for any new TPM guidelines," the Transpower proposal document says. Submissions on the proposal are due by July 10.

Meanwhile, very low inflows into hydro storage lakes over the last three months have seen power regularly flowing south from the North Island, where there has been plentiful rainfall and where Genesis and Contact Energy are both running gas and coal-fired plants hard. Genesis has been running its 500 Megawatts of gas and coal-fired units at the old Huntly Power Station on a 60/40 gas/coal mix, Genesis chief executive Marc England said.

In the South Island, Contact and Meridian are both dusting off dry winter preparations which could allow them to drain Lakes Pukaki and Hawea to lower than normal operating minimum levels, although that is not yet in prospect, said Contact chief executive Dennis Barnes.

(BusinessDesk)