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2001 Conference - Rotorua
Upgrading Electricity Supply
- A Case Study
Brent Layton
Economist
Contents
Overview
- No longer an hypothetic example
- Electricity consumption is forecast to rapidly and
significantly increase on the West Coast
- Causes of expected increase are:
- Growth in dairy farming
- Growth in dairy processing
- Increased gold and coal mining
- Increased tourism
Options to Increase Capacity
- Either invest in upgrading transmission lines to West Coast
- Central SI line small and would be difficult to upgrade
- Northern line needs some maintenance
- Or invest in increased generation on the West Coast
- Trustpower has recently announced a proposal for a 60MW
hydro station at Dobson (near Greymouth)
Decision if Situation Faced 25-Years Ago
- Decision would have been largely internal to the Electricity
Department
- Probably would have been to invest in upgrade of transmission
lines
- Economies of scale in generation (60MW v. 400MW)
- Full capital costs and risks not taken into account with big
hydro generation schemes
- Electricity Act provisions for line installation
- No RMA and DOC
Situation Faced Today
- Transmission upgrade decision Transpower's
- Generation investment decisions are for private sector or SOEs
- Economies of scale in generation less significant
- Investors face full costs of capital and generators bear risks
of investment decisions
- No Electricity Act for line installation
- RMA and DOC effective environmental hurdles
Process for Making Decision
- Part F of new electricity industry Rule Book contains
processes by which:
- Transpower is required to reveal asset management plans for
next ten years
- Any party can put up a proposition to invest in
transmission, or a substitute for transmission (e.g.
generating capacity)
- Binding votes can be made on such proposals
- The outcome of voting can be appealed to the Electricity
Governance Board in certain circumstances
- The "transmission" investment proposition must
indicate who will pay for the investment, and how
- The proposed charging must conform with pricing principles set
out in the rules
- The pricing principles are aimed at ensuring efficient
investment decision making
- The appeal process is to ensure that parties cannot block
investments which are not in their own interest, but would
provide net public benefit
Application of Part F
- Trustpower will probably use Part F for its Dobson station
proposal to try to get a return for avoiding transmission
investment costs in addition to the return on its energy sales
- There are many other situations where Part F will be useful:
North Shore; central North Island; Taranaki; Christchurch
- Part F will be particularly useful to those interested in
developing or expanding small regional power stations
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