Network owner blasts regulator

Transpower has taken the Electricity Commission's rejection of its plan to build a 400kV line from the Waikato to Auckland over the head of the regulator directly to the Government.

In a letter obtained by the Business Herald to Energy Minister David Parker, Transpower boss Ralph Craven has attacked the regulator for using what he says is a deeply disturbing, "experimental and highly theoretical" method to reach its decision.

He also accuses the commission of a flawed process, criticising it for failing to adequately engage with Transpower as it came to its decision.

"Transpower believes the approach is contrary to good independent practice and is confident that objective independent advice would warn against [it]," Craven said.

At the heart of his criticisms is the commission's "grid investment test". This is one of the key planks to the regulator's decision-making process and assesses the benefits of Transpower's proposal against alternatives that it concocted.

The test showed that spending $140 million on the existing network - and building new power stations near Auckland - could delay the planned line until at least 2017, saving the country as much as $250 million.

The saving was so big the proposal failed the grid investment test.

Craven wrote: "It appears the commission's approach has been characterised by experimental techniques and tried-but-rejected approaches to transmission planning and more importantly to the reliability of the power system."

Aspects of the test he criticises directly include: the alternatives used to assess Transpower's proposal, the expected savings compared with the country's expenditure on power, the planned delay of the line relative to the life of the asset, and delays in commissioning such projects.

He also complains the regulator did not consult Transpower when it developed its approach to the test.

"The first serious discussion about the commission approach to the application of the [test] occurred in mid-March, two weeks before the commission made its interim decision.

"This is in spite of repeated requests for more detailed engagement ... from October 2005," Craven said.

He said the upshot would be construction of fossil-fuel plants closer to Auckland at the expense of environmentally friendly projects further south, greater risk and reduced grid reliability.

"One of the key issues with transmission planning is that the event horizon is several years out," he wrote.

"Once the impacts of poor planning become evident there is no quick fix and the country could be plagued by poor reliability for as long as it takes to fix the problem. There is of course the prospect that nothing will go wrong, but it usually does."

The rejection of the plan has yet to be put to the public for consultation before it is finalised in July. But if it is upheld, Transpower will have to come up with a new plan or challenge the commission in the courts. 

UPGRADES PROPOSED BY THE ELECTRICITY COMMISSION:

Before 2010

* Line upgrades.
* New substation at Huntly.
* Capacitors at Kaitaia, Albany, Bombay and Otahuhu.
* Transformer at Bombay.

Before 2017

* Line upgrades.
* New capacitors at Huntly.
* Transformers on circuits between Arapuni, Pakuranga, Hamilton, Bombay.
Total cost around $140 million. 

BIG DECISIONS ON WAY SAYS CULLEN

Finance Minister Michael Cullen says he has doubts about the capability of the electricity market to deliver supply certainty and some crucial decisions on power are due within weeks.

"I still have grave doubts about the capability of the current framework of this market to deliver the kind of certainty we need and also the kind of emphasis on renewable generation that we need, given other factors such as the Kyoto agreement," he said on TV One's Agenda programme at the weekend.

Asked what could be expected for electricity, he said "a lot of thinking and talking" was going on.

"And obviously some of that [is being done] quite quickly because there are decisions being made within the next few weeks which are quite crucial in that context."

He did not elaborate.

- Stephen Ward