Hamish Rutherford: Rio Tinto's slide towards special treatment proves timing is everything

For years Rio Tinto has been arguing for cheaper transmission pricing for the smelter at Tiwai Point, but its heavy lobbying on the eve of the election appears to be making headway. Photo / Getty Images

COMMENT

Whatever sins Rio Tinto can be accused of, inconsistency is not one of them.

For years the majority owner of the Tiwai Point aluminium smelter has argued, over and over again, that it is treated unfairly when it comes to the cost of connecting to its electricity supply.

But with an election looming, it appears asking the same question in a slightly different way - and warning you're prepared to cut 1000 jobs - can pay major dividends.

Despite being a relative stone's throw from the Manapouri Power Station, it shells out tens of millions of dollars a year, paying for upgrades to the national grid which in most cases provide it with zero benefit.

"The smelter has paid over $600 million in transmission over the last decade, of which we estimate over $200m has paid for grid upgrades to take power from the south to the north of the North Island," Stew Hamilton, chief executive of the smelter, wrote to Energy Minister Megan Woods' office in late November.

If Hamilton's argument sounds compelling, the Electricity Authority (EA) - which regulates the sector - has been unmoved for years.

Rio Tinto made this argument to the regulator in 2016 and again in 2019, to the former National Government in 2013 - and no doubt many times before.

While the smelter argued that in theory it could build and operate its own transmission lines more cheaply than the service Transpower provides, the regulator was unmoved, in part because the argument could only ever be in theory.

No one believes that resource consent would be approved for duplicate lines through a World Heritage Site.

The EA also rejected extending the discount to situations where transmission prices could lead to a major user exiting New Zealand because it could not be sure whether major companies like Rio Tinto might try to game the system. Perish the thought.

Part of the reason Rio Tinto saw no relief was, ironically, political.

Arguments over transmission pricing are a zero-sum game. Every dollar one side saves is paid by the other. If Tiwai Point was granted special treatment, consumers in the North Island would face a hike.

The position appears to have changed profoundly in December, weeks after Rio Tinto warned that Tiwai Point's future was in doubt, creating the risk of around 1000 provincial job losses.

While the Government has insisted it is not offering a subsidy to Rio Tinto, it is certainly playing a role.

On December 16, Alf Barrios, one of Rio Tinto's top global executives, flew to Wellington to lobby Woods and Finance Minister Grant Robertson in the Beehive.

A day later - before he even left the capital - Barrios thanked the ministers for an offer "to assist us in building a business case" for a discount on transmission to a price "which better reflects the service we receive". He also welcomed the offer of brokering an industry-wide meeting.

If Barrios had mistaken the intent of the ministers, Woods did nothing to set him straight.

This week Rio Tinto met with the regulator and electricity generator representatives, weeks after the EA proposed a significant change in policy in the smelter's favour.

On Thursday Woods told me that she thought it would be a good idea for Rio Tinto to hold a meeting with the Electricity Authority, and that setting up the meeting was the extent of her input.

Not only would that suggest Woods was not aware how frequently Rio Tinto meets the regulator already, she seems to be suggesting that the timing of the EA's significant change of mind on the smelter's arguments on pricing was all just a massive coincidence.

Were that the case she should have asked Barrios to stick to that script. Given that the change in policy could be worth tens of millions of dollars a year to the mining company, surely he would have obliged.