The Labour Party says the national grid operator Transpower is "simply profit-making for the Government" and consumers' power bills will go up as a result.
In documents obtained by Radio New Zealand under the Official Information Act, Transpower says it expects the upgrade of its network to be completed before July. It says that will create savings that could be returned to the Government in the form of higher dividends.
Labour and the Greens say any savings made from the upgrade should be passed on to consumers through cheaper electricity prices.
"It appears to me that Transpower is simply profit-making for the Government," says Labour energy spokesperson David Shearer. "It's obviously got an instruction from the Government to generate as much profit as it possibly can do, and in turn that's going to hit consumers in the pocket, because their power bills go up."
Mr Shearer says that in the six months to the end of last year Transpower generated a profit of $153 million for the Government, which was up 117 percent.
"Transpower should not be a revenue-generating project for the Government," he says. "It should be an agency which runs the grid as efficiently as it possibly can so that consumers get good value for money and cheaper prices."
It can't be done - Transpower
Transpower chair Mark Verbiest told Morning Report it can't pass the dividend back to power users but there's no reason power bills should go up.
"Our prices reflect a revenue allowance that it is set by the Commerce Commission," he says. "So the regulator sets our prices; dividends in fact have no impact on what we charge."
Mr Verbiest says transmission charges to customers, which make up about 10 percent of power bills, should stay flat or decline once the upgrade is completed.
Finance Minister Bill English has also pointed out that Transpower is regulated by the Commerce Commission, which decides what rate of return it should be allowed to achieve.
"If they run more efficiently," he says, "then the Government will continue to get dividends. But the efficiency gains themselves will get passed back to the consumer, again because they are limited as to how much profit they can make."
In its strategic issues letter for the coming financial year Transpower has told Mr English and State-Owned Enterprises Minister Tony Ryall that if the commission imposes a tougher regulated return on its business, its revenue could fall by $50 million a year.
Mr English says that what the commission does is "all arm's length from the Government. We don't have anything to do with it."