Major electricity users say TPM change will have dire impact

Sunday, 20 October 2019, 12:16 pm
Article: NZ Energy and Environment Business Week

Major electricity users warn TPM changes will have dire impacts

First published in Energy and Environment on October 10, 2019.

Major electricity users who face increased charges under the revised transmission pricing methodology worn of dire consequences including the possibility of closure and major job losses. Conversely, Rio Tinto, whose Tiwai Point aluminium smelter would have reduced charges, says the changes proposed do not go far enough and are too slow.

NZ Steel said the proposal is not proportionate, fair or equitable in the way that it treats regulated parties, and is inconsistent with the EA’s statutory objective.

It had made investments to reduce peak load and now these would be penalised under the changes.

The proposed cap on price increases “will not stop price shocks”.

“The Authority's proposal will have a significant financial impact on NZ Steel. Based on the Authority's modelling, the estimated charges for NZ Steel would increase by $9.5m per annum without a cap, and be $3.5m higher than they currently are with a temporary proposed cap in place.”

This would be a significant factor when NZ Steel's parent company, BlueScope, is “considering future international investment/re-investment options, and may impact the longer term sustainability of the business”.

It would not be able to pass on costs and would not be able to compete with international production. This “could put NZ Steel’s operations in NZ at risk”.

Norske Skog Tasman said electricity is its single largest cost and maintaining an affordable electricity supply is essential to NST’s survival in the declining newsprint market. The changes would “cause significant financial stress to NST”.

Refining NZ also said it would find it difficult to compete with Asian refiners putting at risk 1100 Northland jobs which are “dependent on the refinery with the refinery contributing around 7% of Northland’s GDP. Another 2400 jobs in specialist services across the country are also dependent on work provided at Marsden Point”.

Echoing many of the complaints from NZ First MPs on the prior TPM, it said the proposal is based solely on the economics of using the electricity grid and ignores its social and environmental impacts.

“The poorer sections of the community… will face the biggest increase in transmission charges simply to retain an existing level of service.”

In the “absence of pragmatic change, that is fair and equitable to all electricity consumers, Refining NZ is of the view that such an important matter is beyond the purview of the EA and would be better managed via a government policy statement”.

Rio Tinto said under the existing TPM, Tiwai Point, compared with its international competitors, faced very high power costs.

It said NZ Aluminium Smelters had repaid many times over the cost of building the Manapouri and the transmission lines connecting it to Tiwai.

The latest TPM proposal was an improvement, but still had “flaws, inconsistencies and a lack of transparency”.

Under the proposal, NZAS would face excessive transmission charges until at least 2024 if the TPM is revised in accordance with the current proposal.

“Rio Tinto continues to encourage the Authority to progress its TPM review with the utmost urgency, though Rio Tinto can no longer rely on the review to deliver appropriate and timely relief from very high transmission charges for NZAS.”

First published in Energy and Environment on October 10, 2019.

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