Power price plan is on hold

Electricity prices in Northland are no longer about to soar, at least not yet.

The Electricity Authority has back-tracked on plans, or at least put them on hold until after the election, that would have raised power prices across Northland significantly, and could have seen the region's biggest employers shedding jobs.

The Authority announced last week that it had discarded the cost-benefit analysis on which its plans had been based after a series of major errors were found.

Those errors are understood to be as fundamental as locating power stations on the wrong island and overstating the Far North's power consumption by a factor of 10.

If the price reform had been imposed as originally intended, line charges for Far North households would have risen from $155 to $421 a year, and from $300 to $560 in Whangarei and the Kaipara, but the effect on Northland industry could have been even more damaging.

New Zealand First leader and Northland MP Winston Peters said the changes would have added $500,000 a year Juken NZ's power bill alone. In total the changes would have added $10.6 million a year to Northland power bills, Mr Peters said.

The proposed EA price reform was also cited by industry players as the main reason why plans for a $300 million pulp mill, offering 200 jobs, were shelved at Ngawha, although the government said the future timber supply was the main factor.

Earlier the union E Tu said jobs could also have been put at risk at the LVL mill at Marsden Point, Golden Bay Cement at Portland, and Fonterra plants at Maungaturoto and Kauri.

Mr Peters was quick to claim credit for the EA "back flip," saying it had come about as a result of his party's pressure. He warned, however, that the reform had been deferred, not abandoned altogether.

"The EA has only been made to kick this proposal into the long grass of 2018, which, of course, is post-election," he said.'

A coalition of power firms, led by Trustpower and including Northpower and Top Energy, had been fighting the proposals for a number of years, but were only allowed to see the numbers behind the flawed cost-benefit analysis a day before the last consultation round closed.
Far North Mayor John Carter called the EA's announcement "really positive," however. Its proposed pricing restructure had put Top Energy's plans to expand its power station at Ngawha, making the Far North self-reliant in electricity, at risk, he said, as well as plans for an industrial park that would deliver much-needed jobs.

Top Energy chief executive Russell Shaw was "very encouraged" by the EA's decision, saying that the company would continue to work with the Authority to achieve the best outcome for consumers.

The aim of the Authority's transmission pricing methodology review was to shift the cost of transmission line upgrades to the areas that directly benefited. Consumers close to the major power generators in the South Island would pay less for electricity, and most distant areas, such as Northland, would pay more.

One of the possible outcomes would have been a $50 million per year drop in the power bill paid by Rio Tinto, the multinational owner of the aluminium smelter at Tiwai Point. In 2013 the government gave Rio Tinto $30 million to keep the smelter open at least until this year.

However, the EA said it was still committed to reforming the country's transmission pricing system.

Chief executive Carl Hansen said the current system was not durable, and encouraged wasteful investments, resulting in higher prices for consumers. First, however, the EA would have prepare a new cost-benefit analysis.

The previous analysis was sent back to Australian consulting firm Oakley Greenwood in February with orders to fix a series of errors, but later even more errors were found. Mr Hansen said the EA was considering trying to get its money back for the abandoned analysis.

He expected the new cost-benefit model would be ready late this year or early 2018. Any changes would be implemented by April 2020.

Mr Peters said he had long challenged the EA's methodology, but his concerns had been dismissed as politicking or plain wrong. Now that the EA had been "found out," it was blaming the firm that prepared the cost-benefit analysis.

The episode raised further questions about the value of the EA and the three ministers who had held the energy portfolio during the review process, he said.