Transpower seeks higher charges to fund $4.7 billion grid upgrade

Transpower plans to spend up to $4.7b on upgrading the national power grid.

Transpower wants to raise its transmission charges to help pay for a $4.7 billion upgrade of the national power grid.

State-owned Transpower, which has a monopoly on national power transmission, has submitted its proposed spending to the Commerce Commission for the five years starting April 1, 2025.

Transmission charges currently represent 8 per cent of the average household electricity bill, and Transpower forecasts this will rise to an estimated 10 per cent of the average bill during 2025 - an increase of around $7 per month.

“Deferring investment might delay price increases now, but it would come at an increased cost and a less reliable grid over the long term,” Transpower chief executive Alison Andrew said.

She said pressure on materials and workforce availability would also present challenges for Transpower and the wider industry.

Andrew said the next five-year regulatory period would see intensified work on the national electricity transmission grid to replace or upgrade ageing assets.

“Much of the national electricity transmission grid was built between the 1950s and 1970s, and now [will require] an increasing level of replacement and refurbishment work over the next 10 to 15 years to ensure the ongoing safe and reliable performance of the network,” she said in a statement.

Alison said the work would form a foundation for any future enhancements to the grid to support electrification and New Zealand’s transition to a net-zero carbon future.

The proposal forecasts capital expenditure of $2.25b across the five years, up 32 per cent compared to the current regulatory period, and $1.96b in operating expenditure, up 20 per cent.

Another $490 million has been identified for additional reliability, resilience and enhancement projects that are likely to be delivered in this period.

Alongside the growing work programme, the increases reflected the impact that higher interest rates and inflationary pressures were having on the supply chain.

“We are working together with our partners throughout the electricity industry to support initiatives during the next regulatory period that will grow our industry’s capacity and capability,” Andrew said.

“This includes strategies to manage and support supply chain challenges across the sector. We particularly see a strong need to continue investing in the electricity workforce and ensure project delivery is not limited by workforce availability.”

Under the Commerce Act, Transpower is required to provide a five-year expenditure and quality of service proposal for the Commerce Commission to review.

The commission uses this information and its own analysis to determine Transpower’s expenditure allowances and service levels, which in turn determine the revenue Transpower will be able to recover from the industry.

Transpower is currently operating in its third regulatory control period, which finishes on March 31.

The Commerce Commission will consult on Transpower’s proposal before releasing its final decision in late 2024.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.