Household power bills in for shake-up

A plan to radically change how New Zealanders pay for their power will be unveiled today after a decade of deliberation.

The Electricity Authority (EA) has been reviewing the way electricity transmission is charged, the Transmission Pricing Methodology (TPM). Transmission charges are a part of the cost of a monthly power bill (about 10 per cent), but changes to the way they are priced could lead to big changes for households.

The charge pays for the cost Transpower incurs getting electricity from where it is generated to where it’s used. It gets spent on maintaining lines and upgrading infrastructure where it’s needed.

The EA thinks the current system is inefficient. A document setting out proposals last year, describes it as a ‘‘postage stamp’’ approach: people pay more or less the same amount, regardless of whether you’re sending a letter down the street or to the other end of the country.

This spreads the cost of big investments in grid infrastructure, despite those investments only really benefiting the people who live by them. Regions pay for investments they don’t use.

Another problem is the Cook Strait cable that carries electricity between the South Island and the North. South Island generators pay for the cost of the cable, while North Island generators avoid having to pay, which the EA has called a ‘‘tax’’ on the South Island gentailers.

The EA has proposed using a ‘‘benefits-based’’ approach where people would pay for the grid investments they benefit from.

As renewable technology improves, the EA wants customers to face the real cost of getting electricity to their door.

But a change to a more market-driven approach has its drawbacks. Consumers advocates are concerned people in the rural North Island will be walloped with massive electricity bills to pay for the cost of maintaining their lines.

Aucklanders will also be forced to shoulder a bigger burden, as the city upgrades lines to deal with its ever-increasing demand.

NZ First leader Winston Peters effectively torpedoed the last TPM proposal unveiled by the EA after he stirred outrage at the increased costs to consumers.

Despite the decade spent mulling changes, a group of businesspeople has called on the EA to delay the proposals further, citing Covid-19-related uncertainty as well as the question mark hanging over New Zealand’s biggest power-user, Tiwai Point aluminium smelter.