Entrust welcomes Transpower transmission pricing operational review

Entrust today welcomed the announcement by Transpower that it would conduct an Operational Review of transmission pricing.

“Industry concerns about the transmission pricing methodology review have been ignored by the Electricity Authority to date, so it is positive to see Transpower showing a leadership position and proactively conducting an operational review,” said Entrust Chairman, William Cairns.

Mr Cairns said he hoped the operational review would include a robust cost benefit analysis of any proposed changes.

“We hope Transpower avoids the wealth transfer approach favoured by the Electricity Authority which, if implemented, would have resulted in consumers being worse off overall. Under the Electricity Authority proposal Aucklanders were facing large transmission pricing increases while electricity generators such as Meridian and Contact and the owners of Tiwai Smelter would have made windfall gains.

“We believe it is fairer to spread transmission costs for existing assets equally across all users of the grid, including electricity generators. This is fairer and in the long-term interest of consumers.

“To date we have seen the Electricity Authority ignore numerous expert reports that have been critical of their proposed approach for changing transmission pricing. We hope Transpower will review these submissions as part of its operational review, fully engage with the industry and then listen to the feedback that is provided.

“International experts asked to comment on the Authority’s proposals have consistently and categorically warned the Authority there is no efficiency benefit to be gained from re-pricing sunk assets,” he said.