Commission approves Transpower’s $36 million electricity investment for South Auckland

The Commerce Commission has released its final decision allowing Transpower to invest $36 million to replace ageing infrastructure and cater for increasing electricity demand in South Auckland.

Transpower, which owns and operates the national electricity grid, applied to the Commission in May 2020 to spend $36 million to invest in its Bombay–Otahuhu regional network by June 2023.

“Consistent with our draft decision, we remain of the view that this investment is needed to increase the capacity of the network and improve the reliability of electricity supply to the Bombay–Otahuhu region,” Commission Deputy Chair Sue Begg said.

The decision allows Transpower to recover the cost from consumers of purchasing and commissioning two new transformers at the Bombay grid exit point, as well as undertaking preparatory work to replace conductors on the Otahuhu to Wiri line.

“Our decision enables Transpower to deliver the right investment at the right time to meet future demand,” said Ms Begg.

Transpower is currently developing its understanding of the likely costs of the conductor replacement for the Otahuhu to Wiri line. It intends to replace the conductors and recover the cost of the proposed replacement by seeking an amendment to the Commission’s decision at a later date.

“We recognise there have been some concerns about resilience and the potential removal of the Bombay to Wiri line following the completion of the proposed Otahuhu to Wiri reconductoring. Our decision today does not affect the future of the Bombay to Wiri line, and we encourage Transpower to work with its customers in the region to resolve those concerns,” she said.

The final decision can be found on the Commission’s website.

Background

Transpower owns and operates the national high voltage electricity grid which moves electricity from where it is generated to where it is needed. Transmission charges make up about 10% of an average consumer’s power bill.

Transpower is regulated under Part 4 of the Commerce Act as it has a natural monopoly in the market for electricity transmission services.

The Commission regulates Transpower through an individual price-quality path (IPP). When setting each IPP (for regulatory periods of no more than 5 years), the Commission approves Transpower’s base capital expenditure allowance for each year the regulatory period covers. The current regulatory period runs from 2020 to 2025.

At any time, Transpower can submit a major capital expenditure proposal to the Commission seeking approval to invest in and recover the full costs of its investments from consumers for a project costing more than $20 million to enhance or develop the national grid.

If the Commission approves a proposal, Transpower can include the infrastructure costs in its regulatory asset base. Those costs can then be recovered as transmission charges according to the transmission pricing methodology (TPM).

In mid-2020, the Electricity Authority finalised guidelines to Transpower to develop a new TPM. Once approved, the new TPM will apply to Transpower’s future recovery of the costs of the project.

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