Cheaper power possible for South

Power prices could fall in the South Island after a High Court decision ordering the Electricity Commission to reconsider who pays to operate the interisland power link.

If the commission decides all generators should contribute to the cost of the high voltage direct current (HVDC) link -- not just southern generators, as is currently the case -- customers in the South Island might see cheaper electricity, Electricity Commissioner Roy Hemmingway said.

North Island consumers could pay more for their power as they shoulder part of the cost of the HVDC interisland link.

The cost of paying for that cable was described as "tens of millions" in a High Court decision handed down on Monday in the High Court at Wellington.

Justice Mackenzie's decision followed criticism of the commission from South Island power generators Contact Energy and Meridian Energy earlier this year.

The commission had decided the status quo should remain regarding who paid for the operation of the interisland link, meaning South Island generators paid and North Island companies did not.

Justice Mackenzie ordered the commission to "reconsider the guidelines" and undertake more consultation.

"I consider that the commission has not fulfilled, to the extent required by law, its obligation to consult in respect of the applicants," his decision said.

"The deficiencies in the consultation process are sufficiently serious that reconsideration of the guidelines as to the HVDC charge is required."

Mr Hemmingway said the commission had yet to make a formal decision whether to appeal the judgement, but said: "I doubt very seriously we would appeal".

It was too early to tell whether the commission's decision would change after the further consultation, and the issue would be addressed with an open mind.

Meridian Energy spokesman Alan Seay welcomed the court ruling, and said the review sought with Contact Energy was over the process used by the commission in reaching its decision.

"We felt we weren't adequately consulted with, so we sought the judicial review, and it's found very comprehensively in our favour," he said.

Asked whether the review could bring lower power prices for the South Island, he was cautious: "I think it's just too early to speculate what the outcome of all that might be."

Contact spokesman Pattrick Smellie was also cautious about whether the review would see South Island power prices fall.

"It's a long way off in the future to be thinking about that in any kind of substantive way... What the impact would be on tariffs is very hard to say."

Transmission costs were only part of power bills, he said.

- nzpa