Power without responsibility

Roy Hemmingway says there is public benefit to reviewing Transpower decisions. Picture / Martin Sykes

Where does the buck stop?

That is the question electricity industry observers are posing after the electricity watchdog's rejection of Transpower's controversial plan to build the 400kV line through the Waikato to Auckland.

Analysts questioned whether the Electricity Commission had deprived Transpower of the ability to make the investments it saw fit. If so, the regulator had diluted the national grid operator's duty to ensure that energy flowed to where it was needed.

"If the shower goes cold in Auckland, you will want some comeback," said one industry source.

McDouall Stuart analyst Chris Stone asked: "Is it the role of the regulators to determine where Transpower's next investment is going to be?"

The commission said an investment of $140 million in the existing network - and perhaps the construction of power stations near Auckland - would delay the need for a line at least until 2017. That delay would save the country as much as $250 million.

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

Commission chairman Roy Hemmingway said he was comfortable with the regime, which gave it the right to block such proposals.

"This is the regulatory regime [found] around the world. No one is suggesting that Transpower should be able to invest how and when it likes," he said. "Being able to look at a proposal and say there is a $250 million better idea out there has value."

The commission said the alternative transmission lines it proposed were between $96 million and $254 million cheaper than the $775 million it estimated as the final cost for Transpower's proposed line.

It had tested these estimates against a variety of assumptions including greater land costs, fuel costs and differing the costs of financing the project, yet it got the same answer.

"Our draft decision is robust. It does not depend on a heroic set of assumptions. Even when we use a variety we end up with the same draft conclusion." Hemmingway added that the postponement would not compromise security and he was confident the regulator and Transpower could work through the disagreement.

It would give Transpower time to cater the network for developments in technology and demand for electricity.

He said the commission's decision to start consultation on the practicality of acquiring a transmission corridor might ultimately give landowners greater certainty and avoid the complications of acquiring land in the future.

Major power companies were subdued. They, with Transpower, have argued the line would have provided capacity to ensure robust competition, especially from new sources of electricity such as wind power.

A spokesman for state-owned generator Meridian said the company was yet to be convinced there were viable alternatives to the planned 400kV line.

"Meridian has said the line needs to go ahead. We have not changed our mind that significant investment is needed. If there are alternatives to transmission, we would have seen them emerge."

Contact Energy chief executive David Hunt said the rejection raised important questions as to how best to secure a reliable supply of electricity into Auckland.

"A flexible and modern national grid is also required to cope with increasing amounts of fluctuating wind energy, which is projected to come on stream over the next few years."

Genesis said it was too early to comment.

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IN THE PIPELINE

ALTERNATIVES

* 2017 new 400kV transmission line.
* 2017 new 220kV transmission line.
* 2017 new HVDC transmission line.
* 2021 new 400kV transmission line.

PROPOSED UPGRADES

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.