News | March 27, 2014

Commission Releases Draft Decision On Transpower's Line Upgrade

The Commerce Commission has recently released its draft decision to approve Transpower’s proposed line upgrade between its Bunnythorpe substation near Palmerston North and Haywards substation in the Hutt Valley.

Transpower requires funding of up to $161M to complete the project and must seek approval from the Commission to recover the costs for major capital investments it undertakes.

Transpower plans to replace the existing conductors, or wires, on the two transmission lines between the Bunnythorpe and Haywards substations. The existing conductors would be replaced with larger ones that Transpower currently uses for these types of transmission lines, which would increase the capacity of each line by about 12%.

Construction is planned to start in the summer of 2014/15 and be completed by 2020. Transpower estimates that the investment will, on average, add 0.041 cents per unit to consumers' bills.

“There is a clear benefit for consumers from replacing the transmission lines which are in poor condition. Transpower has calculated that a new line with the same capacity would provide an expected net electricity market benefit of $977M,” said Commerce Commission Deputy Chair, Sue Begg.

“Transpower has proposed to increase the capacity of the lines. The proposal to upgrade the lines would achieve benefits by reducing transmission losses and improving the ability to use the cheapest mix of generation between the thermal generators in the North Island and the Hydro generators in the South Island.”

“Of the alternatives considered, Transpower’s preferred option appears to provide a good balance between increases in capacity, capital costs and expected benefits for the electricity market,” said Ms Begg.

The Commission is seeking feedback on its draft decision and Transpower’s proposal by 11 April 2014, and expects to finalise its decision by 2 May 2014.

The Commission’s draft decision and Transpower’s proposal are available on the Commission’s website:www.comcom.govt.nz/bunnythorpe-haywards-a-and-b-lines-conductor-replacement-investment-proposal

Background
Transpower must seek the Commission’s approval to recover the costs for major capital investments it undertakes. Major capital investments are those to enhance or develop the transmission grid and that have an expected cost greater than $5M and are for new investments or asset upgrades, rather than ‘like for like’ asset replacements.

The rules relating to Transpower’s major capital investments are addressed in the Transpower Capital Expenditure Input Methodology Determination. The input methodology requires Transpower to seek approval for major capital projects in the national grid, and to deliver these projects to a set of approved components to recover the full cost of its investments from consumers.

When seeking approval, Transpower must outline its proposed investment, justification for the investment, the options Transpower has considered, the costs and benefits of the investment options and demonstrate that its proposal meets all the requirements in the input methodology. The Commission can only approve or reject a proposal from Transpower, rather than change any of the components that Transpower has proposed.

SOURCE: Commerce Commission

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