08 March 2017

Unanimous support for “user pays” electricity scheme

Tim Newman -

Southland businesses, local government and residents have presented a united front in the latest submissions on electricity prices.

The Electricity Authority had previously asked for consultation from the public on the second issues paper of the Transmission Pricing Methodology, and received submissions from December 13 until February 24.

The TPM calculates energy payments for regions throughout the country, based on the cost it takes to transfer power up and down the national grid.

The last set of recommendations, which significantly reduced the benefits that Southland was set to receive, was widely unpopular throughout the region.

The authority had planned to put a cap on price increases at 3.5 per cent, which would lessen the blow for regions such as Auckland and Northland, which were set to pay more.

About 30 Southland-based submissions were put to the Electricity Authority, out of a total of more than 100.

The submissions came from all sectors of Southland, including industry, politicians, businesses, and regular consumers.

Throughout the submissions from Southland, there was overwhelming support for a “user pays” pricing system.

This would have significant economic benefits for the region, particularly because of Southland’s proximity to renewable energy sources.

An 18-point proposal was submitted by Venture Southland on behalf of the region, which was supported by a wide range of different organisations.

The proposal was supported by the Southland District, Gore District and Invercargill City councils, MPs Sarah Dowie and Todd Barclay, and the Southland Chamber of Commerce.

Industry leaders also got in behind the submission, including South Port, EIS, and Dongwha New Zealand.

A key point of contention on the current payment system was the fact that the South Island and lower North Island had disproportionately subsidised upgrades to electricity transmission in the upper North Island.

In the submission made by Venture Southland, chief executive Paul Casson says this had had an adverse effect on the rest of the country.

“The current dependency-based subsidised model of the TPM, whereby southern residents and businesses are subsidising the massive investment in the upper North Island grid caused by rapid growth in Auckland and environs, needs to be immediately corrected.”

$1.3 billion has been spent on the upper North Island grid since 2004, yet only 39 per cent of the investment has been paid for by the upper North Island.

Since that time, transmission prices have increased by 330 per cent in the South Island, 225 per cent in the lower North Island, and 40 per cent in the upper North Island.

Casson said this pricing system, if left uncorrected, would have a major negative impact on Southland’s economy.

“Southland as a region with a population of 96,000 people consistently punches above its economic weight and produces or processes 15 per cent of all of New Zealand’s tradeable exports, but it is also a region highly exposed to international commodity prices.

“Unfortunately the current TPM is not cost-reflective and adversely impacts on business competitiveness in the South by imposing unreasonable costs on southern industry and consumers.

“Venture Southland believes in the principle of user pays. If you are the customer that benefits from a service then you should pay for it.”

Casson said any changes to the system were long overdue, and in any case would not provide compensation for the over-charging the Southern region was already facing.

“It is important that the Authority does not delay its work in reviewing the TPM.

“Customers in regions like Southland and Otago are currently facing transmission costs that are much higher than the services they receive.

“Any more delays mean we as Southern customers will be continuing to pay for investments that customers in other regions benefit from.

“We will never be paid back for that over payment – but we would like to stop paying for other regions’ transmission grid infrastructure as soon as possible.”

Otago Southland Employers’ Association chief executive Virginia Nicholls said the Authority should not be “swayed by unsubstantiated posturing based on misleading propositions of harm and instead stay the course”.

“We recognise that change of the TPM will create winners and losers. But the fact that there are winners and losers is not the appropriate benchmark against which to assess the work of the Authority.”

Southland Chamber of Commerce chief executive Sheree Carey said she was pleased with the number of submissions put forward by Southlanders.

“It’s great to see the voice of the south so well represented in this reform. It really matters to our community’s future that we get this right.

“The joint council campaign ‘Fair Go for the South’ was an excellent initiative which promoted awareness of the cause and engagement from the public around this important issue currently facing our region.

“I can’t predict final outcomes but I think anyone who is reasonable would decide that people should pay for what they use, and we can’t afford to continue to fund the infrastructure needed to cope with Auckland’s growth.”

South Port chief executive Mark O’Connor said an equitable transmission pricing model was essential for the success of the Southland Regional Development Strategy, which was reliant on the growth of existing industry and the establishment of new businesses in the region.

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