New rules for national grid

Marko Bogoievski, chief executive of Infratil, which owns 50.6 per cent of Trustpower.

Trustpower could be among the biggest losers under the Electricity Authority's proposed changes to charges for the national grid and is likely to vigorously fight changes to distributed generation pricing changes that could slash $25 million off annual revenue.

Trustpower's annual revenue includes about $25 million of avoided cost of transmission (ACOT) payments. The authority has proposed scrapping the existing rules in favour of a system where distributed generators would need to convince grid operator Transpower that they are reducing transmission costs to qualify for payments.

"(Tuesday) we saw the Electricity Authority come out with new proposals of transmission pricing and the cost of transmission regime," said Marko Bogoievski, chief executive of Infratil, which owns 50.6 per cent of Trustpower.

"Those happen to be quite negative for Trustpower. It probably singles out Trustpower on the receiving end of that."

Analysts at First NZ Capital said Trustpower is the most exposed to any changes because of the amount of ACOT revenue at risk and "will fight this approach vigorously". It was too early to say whether Trustpower would successfully argue to resecure most of that revenue from Transpower under the new proposal, they said in a report.

The authority said Tuesday there had been an almost trebling of ACOT payments since 2007-2008 and it was clear some distributed generators were getting the payments "even when this demonstrably doesn't reduce transmission costs".

It estimated consumers were paying up to an extra $35 million a year with no corresponding benefit.

The authority's consultation paper on transmission pricing proposes replacing the two main charges - $150 million a year for the HVDC link between the North and South islands and an interconnection charge of $639 million a year - with two new charges: an area-of-benefit (AoB) charge of $296 million and a residual charge for Transpower's costs of $500 million a year, spread across the country.

Because consumers in Auckland and the Far North have received the biggest benefits from upgrades of the national grid, ensuring the nation's biggest city has one of the most reliable power supplies, they would face the biggest increases under an AoB regime, the authority said.

A map of increased charges for an average household show the upper West Coast and areas in Canterbury south of Christchurch would also face higher charges. Electricity Authority chairman Brent Layton said he "doesn't expect much cheering" for the proposals and it was inevitable some sectors would be unhappy.

- BusinessDesk