KEY POINTS:
Better prospects for gas or diesel-fired power stations in Northland have contributed to the knockback of Transpower's $480 million plan to upgrade the national grid north of Auckland.
In a draft decision the Electricity Commission has ruled there are cheaper alternatives to the north of Auckland and Northland project which had proposed a new 220kV cross-harbour cable between Penrose and Albany, and a 220kV cable between Pakuranga and Penrose.
The commission must approve transmission projects and in a ruling has concluded that uncertainty over the proposed Genesis Energy power station at Rodney made it inappropriate to approve the transmission proposal "at this time".
The cable between Penrose and Albany was not needed until 2016 and would only take up to four years to build, and it was likely to be known within the next few years whether the 120MW Rodney gas-fired station was going to go ahead.
Genesis is seeking planning approval before a decision on whether to build the station.
That station or a possible diesel-fired plant at Marsden would now be allowed with the moratorium on new thermal base load plants overturned, so reducing the need for new transmission north of the Harbour Bridge, at least in the short term.
While the commission has approved nearly $2 billion in transmission investment in the past five years, it said in this instance that several alternatives - including deferring the investment decision - had significant benefits compared with proceeding with the entire project now.
Those benefits could save consumers between $22 million and $100 million.
Transpower says early work on the more urgent part of the proposal - the cable between Pakuranga and Penrose - is underway and that project is likely to proceed in any event.
In its ruling, the commission said this segment almost certainly met the cost-benefit tests but it had no authority to approve only part of a proposal. It is likely Transpower will have to resubmit this part of the proposal to the commission.
A public conference will be held in Auckland on March 2 for interested groups to make submissions on the decision.
In a letter to the commission, Transpower chief executive Patrick Strange said the effect of the decision was consistent with its most recent proposal which requested that the approval be made in two phases.
"However, the draft decision implies that the commission believes that new capacity at Rodney directly offsets the demand growth which is necessitating the reinforcement. We do not consider this is necessarily true, particularly from a security viewpoint."
When it made the initial application in September 2007, Transpower said demand for electricity in the north Auckland and Northland area could increase by as much as 21 per cent over the next six years.
Ralph Matthes, executive director of the Major Electricity Users' Group, said a more staggered approach appeared sensible.
"Large users in North Auckland agree on the need to strengthen lines through Auckland but not at any cost."
GRID LOCK
* Transpower wanted to install 37km of 220kV underground cable from Pakuranga to Penrose and then to Albany.
* The Electricity Commission believes there are cheaper alternatives to the cross-harbour link which may not be needed soon if power stations are built in the north.
* A public hearing will be held on March 2.
