03 October 2019

Transmission Pricing and Tiwai

Sheree Carey - CEO

A sense of fairness is one of the first inklings most of us have of justice; making sure the glasses of juice are perfectly filled to the same degree, that we get our turn on the slide.

Here in the south of the South Island we are home to some of New Zealand’s finest industry, dairy and meat processing, and manufacturing of some of the lowest carbon highest purity aluminium in the world. This aluminium is sought after by the manufacturers of smart phones and devices and increasingly used to lightweight vehicles as we strive to create a lower carbon economy. But we are also home to an epic example of unfairness.

How the country’s transmission grid costs are allocated has been a hotly debated issue for over ten years. But during those intervening years the Tiwai Point aluminium smelter has been quietly overcharged nearly $200 million for grid upgrades to take power from our hydro rich region north and to bolster the aging grid in Auckland. This is $200 million the smelter will never get back and has had to absorb into its operating costs. This has made commercial sustainability incredibly challenging for the team at Tiwai.

Now the latest proposal for reforming transmission pricing will possibly deliver an $11 million annual reduction in costs – but not before 2024. This is too little, too late but the real kicker is that the smelter will have to contribute $1 million annually for a price cap to soften price increases for consumers in the north. It’s just not fair.