A review carried out by the Electricity Authority in 2016 highlighted that the current Transmission Pricing Methodology (TPM) was inequitable and had an adverse impact on southern industries and consumers.
Following discussions with key stakeholders including Invercargill City, Southland District and Gore District Councils, who identified this as an urgent priority for Southland, Venture Southland prepared submissions on the review in mid-2016 and again in early 2017.
The submissions highlighted that the current Transmission Pricing Methodology was not cost-effective and significantly impacted on business competitiveness by imposing unreasonable costs on southern industries and consumers.
In terms of electricity infrastructure, Southland sits at the bottom of a long, thin electricity transmission grid but is close to significant sources of electricity generation, with around 22% of all electricity generated in New Zealand, generated south of Cromwell.
A strong foundation to Venture Southland's submission was that the current Transmission Pricing Methodology does not consider location, with transmission costs spread across all electricity users, resulting in a bias against the South Island.
Since 2004, in excess of $1.3 billion has been invested in the upper North Island transmission assets, only 39% of that investment is being paid for by the upper North Island. The remaining 61% is being paid for by increased transmission costs in the lower North Island and South Island.
South Island generators also currently pay the whole cost of the Cook Strait cable.
The submissions identified that this arrangement is inequitable to South Island consumers and discourages investment in the development of new generation assets, having an adverse, flow-on impact on the region's economic development.
It was also indicated that the current system of allocation does not meet the Authority’s statutory obligation as it is neither cost reflective, robust or able to drive efficient investment decisions.
The submission advocated that the implementation of a fair and equitable Transmission Pricing Methodology (TPM) is essential to ensuring Southland‘s economic development, including allowing high-value producers to remain competitive.
Venture Southland continues to work alongside key stakeholders to advocate for a fairer method of allocation of electricity transmissions costs.