The Electricity Authority has finally adopted a new pricing plan for power distribution more than 10 years in the making, delivering savings to some users but increases of varying sizes to others.
Electricity pylon. Photo: AFP
The new transmission pricing methodology (TPM) sets how much lines companies and big users pay the $800 million it costs Transpower to run the national grid.
The authority said the new system was centred around a benefit based charge, as it felt households and businesses should pay for the service they received according to how much they were expected to benefit from it.
Modelling from the authority showed the new system will result in changes to typical annual household electricity bills, with those on the South Island's West Coast facing the biggest increases.
Households on the east coast of the North Island could be in for the biggest savings, as well as those in Wellington.
"The old approach was not fit for purpose, smearing transmission costs across the country and encouraging industrial consumers and regional distributors to invest in their own batteries or generation (including diesel generation) simply to avoid paying transmission charges," the authority's director of network pricing Rob Bernau said.
"This meant other New Zealanders had to pay more."
Households supplied by Buller Electricity, EA Networks, Horizon Energy and Westpower could see increases ranging from $61 to $131 in their annual bills, with Buller being the highest.
But those supplied by Eastland Network, Centralines, Wellington Electricity and Waipa Networks could save between $37 and $26 a year, with Eastland customers seeing the biggest savings.
Graphic shows esimated change in cost by provider.
Bernau said the changes were "relatively small" on a per year basis.
"For those at the higher end of the spectrum, there are particular reasons. For example, there's a significant increase for customers in the Buller Electricity region ... but that's actually more about a decision by Transpower to reclassify an asset than it is about the transmission pricing methodology," Bernau said.
It was up to retailers to pass on the costs to customers, he said.
There would also be a transitional cap relative to the 2019/20 charges to soften the blow on customers.
"It's a cap in relation to the whole of a customer's electricity bill. Essentially it looks at their bill that year and says [if the new system] increases their bill by more than 3.5 percent we're going to put that cap at 3.5 percent," Bernau said.
There would be incremental steps year-on-year after that, he said.
Buller would not qualify for the cap as it was not a like-for-like situation like the others, the authority said.
Meridian and Tiwai Point smelter the big winners
The authority's final decision will mean the biggest savings would go to generator Meridian Energy, whose costs would fall by about $13.6m a year, with the Tiwai Point aluminium smelter saving $12.8m, and three large lines companies Orion, Powerco and Wellington Electricity Lines, saving between $7.6m and $9.1m.
A range of other lines companies and firms will make smaller savings.
But the majority of firms involved would face higher costs. The biggest rises would be for power generators - Contact, Mercury, and Genesis; lines companies - Vector, EA Networks, and Horizon; and New Zealand Steel, ranging between $4.2m and $8.7m.
Bernau said transmission pricing was important because it would affect how people used the grid and would also affect investment in the grid and in generation.
"That's particularly important when we're in the context of New Zealand moving to a low emissions economy, where Transpower's modelling says there needs to be another 68 percent of generation in New Zealand by 2050," he said.
It would ensure the people paid the least they can for all the electricity that is forecast to be needed, and future proof for rising demand from electric vehicles, batteries and smart appliances, Bernau said.
The new TPM prices will come into effect from April next year and is forecast to deliver $1.8 billion in benefits over 28 years from the lower cost of electricity.