John Armstrong: Power of one not enough

By all accounts, Wednesday morning's Beehive meeting of the Cabinet's policy committee was a pretty torrid affair.

Officials from the Ministry of Economic Development responsible for energy policy were cross-examined at length by the Prime Minister, who was not well-pleased by Monday's power blackout across Auckland.

Her questioning is said to have been direct and exhaustive. In short, the officials were put through the wringer.

Was the snapping of the earthing cable a design fault? Or did it result from poor maintenance?

Should building the new Otahuhu substation be brought forward, rather than wait until construction of the now-delayed high voltage 400kV transmission line which was originally scheduled to bring electricity to the nation's commercial hub by 2010?

Are other substations on the national grid vulnerable to similar failures? And so on.

However, there is one question which may not be answered to Helen Clark's satisfaction: why does Auckland's power supply come through a single gateway rather than there being alternative routes?

Those with inside knowledge of Transpower say the matter never came up, even though in hindsight it seems an obvious shortcoming in the network.

Transpower will provide answers to the Prime Minister's long list of questions within two weeks. However, ministers are already floating possible fixes to stifle public criticism.

There is talk of either separating facilities at the Otahuhu substation or using it in conjunction with the Penrose substation - two ways of ensuring alternative entry-points into Auckland.

The absence of any advice on the risks associated with a single gateway is one reason the Government is not willing to take the blame for Monday's shutdown of the city, although it is emphasising it accepts responsibility for fixing the problem and ensuring there is security of supply - the crux of the matter for Clark and a major reason she is so grumpy.

Bad enough that Labour gets a clobbering from Aucklanders suffering the inconvenience of a five-hour plus power cut.

Back in February, Clark used her Prime Minister's statement to Parliament to emphasise that despite the wrangle over Transpower's pylons marching across the Waikato, only one outcome was acceptable: an adequate and secure power supply for Auckland.

The Government's blushes are all the redder, for one of its newly promulgated 10-year priorities is turning Auckland into "an internationally competitive city".

Last month's Budget continued in similar vein, stressing Labour's economic transformation agenda includes a special focus on Auckland's electricity infrastructure. "Supply disruptions and constraints impact heavily on business confidence and erode New Zealand's reputation as an attractive place to invest and live," the document warned.

Those words have come back to haunt the Government. The fault at Otahuhu may have been unrelated to the ageing national grid. But the consequences are already apparent. Labour cannot afford to be similarly embarrassed again. It is promising big increases in Transpower's capital spending to upgrade the national grid. While this will be funded by borrowing, Labour is not expecting Transpower to feed the Treasury's coffers with big dividend payments as other SOEs do.

Meanwhile, the Cabinet committee is understood to have asked officials if there are any regulatory obstacles unnecessarily constraining Transpower's ability to upgrade its transmission network.

That concern does not extend to the Resource Management Act, which the Government believes now offers sufficient flexibility to adequately handle planning consent applications of the scale Transpower's large projects entail.

National argues otherwise, saying while the Government can speed the hearing of major applications by invoking ministerial "call-in" powers, it is Transpower's minor projects which are subject to undue delay.

National is understandably profiting from Monday's meltdown to push its barrow on the need to reform the act.

Labour counters by accusing National MPs from the Waikato and the semi-rural south Auckland electorates of being two-faced in backing constituents' use of the act to try to block Transpower's plans for high-voltage overhead lines running from Whakamaru, near Mangakino, to Clevedon, where they will go underground for nine kilometres to Otahuhu.

However, the Resource Management Act is not the major factor frustrating Transpower's timetable for the 400kV line.

Labour delayed progress before the last election for fear of losing votes in National-held electorates. Now that the much larger Auckland vote is at stake, Labour wants to speed things up.

Post-election, however, Transpower's plans have fallen foul of the fledgling Electricity Commission. As the industry's regulator, the watchdog is charged with determining whether the upgrades of the national grid proposed by Transpower, which is in a monopoly position, can be justified on cost-benefit grounds to the wider economy.

The commission scuttled Transpower's plans to build a 400kV line by 2010. It recommended upgrades of the existing network and the building of more power stations near Auckland, thereby pushing the high voltage line out to 2017.

Transpower's alternative proposal would see the line in place by 2012, but not operated at full capacity until that is needed.

Reaching a compromise, however, is complicated by a souring of relations between Transpower and the commission at senior levels.

The stand-off has caused huge consternation in the Beehive with senior ministers making it clear to Transpower and the commission that the acrimony is unacceptable.

While there is little sympathy in the Beehive for Transpower because of the uncompromising fashion with which it handled its initial 400kV proposal, the SOE has shifted ground.

The commission has been prodded likewise not to delay things further by going back to square one in assessing Transpower's revised plan - a plan which finds favour with the Government's preference for renewable electricity generation from around the country flowing to Auckland. Labour sees little benefit in building thermal power stations near the metropolis which run on imported coal or gas.

The behind-the-scenes intervention, which may include a tweaking of the commission's governance rules to speed up the process, is partly a case of the Government grappling with how best to regulate an electricity market which has veered from centralised state control and ownership to a deregulated free-for-all and is now back to something in between.

However, Labour is not of a mind to sacrifice itself on the altar of regulatory consistency. If the political circumstances so dictate - as they did this week - it will intervene to get the result it needs, in this case a modern, high-capacity national grid sooner than later.

The irony is that Transpower emerges as the winner from Monday's chaos despite being responsible for it.