26 Apr 2017

Flaws found in electricity pricing report

2:46 pm on 26 April 2017

The Electricity Authority (EA) has found errors in the report it commissioned into controversial transmission pricing.

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Photo: 123rf

The authority had earlier released draft rules that would have meant people who benefited from grid upgrades, such as Aucklanders, would pay more of the cost of electricity transmission.

But the authority was now looking for new consultants to do a fresh cost-benefit analysis of transmission pricing, after flaws were found in the original work.

The EA's chief executive Carl Hansen said they initially found errors in the work of Australian economic consultants Oakley Greenwood in February.

The authority had "hordes" of experts poring over the report since its release, he said.

The consultants were asked to fix the errors but then further errors were found in their modelling.

He said there also found incorrect assumptions about generation costs, retirement of generators, transmission charges and the location of a new generation plant.

Mr Hansen would not say how much the consultants were paid, but said cost recovery was being considered.

It was a relatively small part of the authority's $77 million budget - less than half a percent, he said.

He said the authority's hiring processes were adequate and it had received good references about Oakley Greenwood.

The authority was determined to push on with changes in the pricing as the current model was not sustainable, Mr Hansen said.

He expected the new cost-benefit model would be ready for consultation in late 2017 or early 2018.

A final decision on the review was likely in the first half of 2018, and any new guidelines would be put in place by April 2020.

Peters criticises transmission pricing error

Northland MP Winston Peters said the Electricity Authority's decision to order another review of transmission pricing showed it was incompetent.

Mr Peters said his party, New Zealand First, told the authority repeatedly last year that its methodology was faulty, but it would not listen.

"They arrogantly attacked us and now all of a sudden, having been found out, they are blaming the very model that they said was defective in the first place," he said.

Northland power company Northpower said a new review was the only responsible and reasonable action it could take.

A company spokesman, Steve McMillan, said this time around both industry and the Ministry of Business Innovation and Employment should be involved in the review.

"One of the big flaws is there has been no mechanism to look at the impact on the regions like Northland and other areas. Those things really need to be taken into consideration with this looked at again with fresh eyes."

The national grid charging regime proposed would have added about $10.6m to Northland power bills.

Mr Peters said the only bright side of the authority's rethink was that consumers would not be facing hefty power price rises in the lead up to the election.

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