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National Electricity Grid Pricing

The Government has introduced an amendment to the Electricity Industry Bill today to give the national grid operator Transpower the legal authority to recover its charges.

Energy Minister Pete Hodgson said recent Court decisions meant Transpower could not automatically recover charges from electricity generation and line companies that had not explicitly signed contracts. The implication was that Transpower had the option of disconnecting non-payers.

"The importance of a secure national electricity supply means the Government obviously cannot tolerate generators and electricity line networks being cut off from the national grid," Mr Hodgson said. "Disconnection may be legally possible for Transpower but it is clearly unrealistic."

"The underlying problem is that there is no generally agreed method for allocating the costs of running the national grid. Max Bradford took no steps to fix this weakness in our electricity system. This Government has recognised the problem and is establishing a process to determine the best methodology for transmission pricing."

Under the Government Policy Statement on electricity released in December 2000 and the Electricity Industry Bill the methodology will have to be agreed between Transpower and the new industry governance board. The Government will be able to refer the matter to the Commerce Commission if no agreement can be reached.

"It may take a year or more to work through the new process and in the meantime Transpower's ability to operate the national grid must be secured," Mr Hodgson said. "This amendment to the Electricity Industry Bill will ensure that from today Transpower can recover its charges."

The new legislation will also stop Transpower and its customers pursuing legal action in relation to existing or new transmission price methodology disputes. Transpower and Meridian Energy have agreed to arbitration over their current dispute.

"These new provisions will lapse once the agreed process for establishing a transmission pricing methodology has been worked through. A sunset clause of two years, with a possible extension of six months, is being introduced but I expect new permanent arrangements to be in place well before then."

"This temporary measure does not imply a Government endorsement of Transpower’s current transmission pricing methodology. The Government has no preference and the new industry board and Transpower will be free to establish whichever methodology they see fit, as long as it is consistent with the principles in the Government Policy Statement."

Ends

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