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Power link delays carry business risk

Thursday, April 27, 2006

Power link delays carry business risk

Business welcomes the acknowledgement today by both the Electricity Commission and Transpower that a high voltage direct current link to Auckland will be needed by 2017, says Alasdair Thompson, chief executive of the Employers & Manufacturers Association (Northern).

As EMA predicted the Electricity Commission report out today rejected the present Transpower proposal to build the HVDC link in 2010/2011.

"The Commission and Transpower are poles apart over when the new link is needed, but we are pleased they agree it will be needed sooner or later," Mr Thompson said.

"Both parties also agree that substantial investment is required on other areas of the electricity network well before 2017.

"The Electricity Commission says it must put Transpower's HVDC proposal through its investment test and if its not up to scratch, decline it.

"In declining it, the Commission argues that the Transpower proposal is to invest seven years too early giving two main reasons:

* the Net Present Value (NPV) of the capital expenditure required is, in the view of the Commission too high, and

* the value of the capacity benefit delivered by the proposal is just $5 million compared to Transpower's valuation of a benefit of $190 million, both over 20 years.

"Our major concern is the impasse between the Commission and Transpower. Until Transpower presents a case the Commission will approve, business uncertainty over the security of power supply will continue.

"The ongoing delays and uncertainty in making the HVDC decision transfer risk to business, with investment likely to be deferred.

"However we agree with the Commission's recommendation that property rights over land likely to be required for the HVDC link should be pursued well in advance of when it is needed."


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