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Transmission pricing methodology – a backwards step for NZ

The transmission pricing methodology (TPM) proposal announced today by the Electricity Authority is based on a philosophy that is a travesty of consumer rights.

• The TPM guarantees Transpower its expected return on its investments in full, whether or not they are used and useful.

• In contrast, consumers who choose to invest to reduce their power bills can be arbitrarily deprived of their expected returns, by new pricing practices condoned by the Authority. One of these specifically attacks investment in rooftop solar electricity, which the Authority deems a waste of money.

The TPM will make domestic consumers on average pay more than they do today; the biggest industrial consumers will pay less. Auckland consumers especially will pay more because their transmission assets have been made highly redundant. This gives the extra security of supply that Auckland business lobbied for – but that many low income consumers cannot afford.

Small generators that were built mainly to supply peak loads will lose the right to that income stream. They will now have to negotiate with Transpower to try to maintain the “avoided cost of transmission” payments they have received to date

This is theft. It is appropriation of the revenues from small-consumer or small-company investments – just because the big companies have the big influence with the Electricity Authority, which has responsibility for pricing methodologies.

At today’s presentation, the Authority’s CEO Carl Hansen promised that though average domestic electricity prices will rise a small amount in the short term, these changes will lead to more efficient investment in transmission, and therefore prices will reduce in the long term.

We’ve heard that one before! In 1998 a succession of Ministers promised that the Bradford reforms - the breakup and privatisation of the local power companies - would lead to lower prices for consumers. The rest is history. Domestic consumers have paid a cent more per kilowatt-hour in each and every year from 2001 through 2015.

The transmission pricing proposal is one of several attempts to entrench the Business-as-usual model of electricity investment at the expense of increasingly affordable small-scale technologies. New Zealand is turning its back on the energy revolution that is sweeping the rest of the world.


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