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Commission releases decision on Transpower upgrade

Commission releases decision on Transpower upgrade

The Commerce Commission has today released its decision to approve Transpower’s proposed $161m replacement and upgrade of the lines between the Bunnythorpe substation near Palmerston North and the Haywards substation in the Hutt Valley.

Construction is expected to start next summer and to be completed by 2020. Transpower estimates that the investment will add 0.041 cents per kWh to consumers' bills.

“The replacement appears to be unavoidable because the lines are in poor condition and doing without them would cost nearly $1b,” said Commissioner Stephen Gale.

“The Transpower proposal includes $10.4m to increase the capacity of the lines. The aim is to reduce transmission losses and improve the ability of the electricity market to use the cheapest mix of generation from the thermal generators in the North Island and the hydro generators in the South Island.”

“The benefits of the upgrade will depend on electricity demand growth and on what new generation is built. The Commission has approved the upgrade but expects Transpower to monitor developments and review the project if there are material changes in the expected benefits,” said Dr Gale.

The Commission’s decision and Transpower’s proposal are available on the Commission’s website:www.comcom.govt.nz/bunnythorpe-haywards-a-and-b-lines-conductor-replacement-investment-proposal

Background

Transpower must seek the Commission’s approval to recover the costs for major capital investments it undertakes. Major capital investments are those to enhance or develop the transmission grid and that have an expected cost greater than $5 million and are for new investments or asset upgrades, rather than ‘like for like’ asset replacements.

The rules relating to Transpower’s major capital investments are addressed in the Transpower Capital Expenditure Input Methodology Determination. The input methodology requires Transpower to seek approval for major capital projects in the national grid, and to deliver these projects to a set of approved components to recover the full cost of its investments from consumers.

When seeking approval, Transpower must outline its proposed investment, justification for the investment, the options Transpower has considered, the costs and benefits of the investment options and demonstrate that its proposal meets all the requirements in the input methodology. The Commission can only approve or reject a proposal from Transpower, rather than change any of the components that Transpower has proposed.

Ends

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