Commission approves Transpower’s $143m investment to manage voltage stability

Transpower submitted a major capital expenditure proposal to the Commission in December 2019 for the first stage of a two-stage project related to the anticipated closure of major generation plants in the Waikato region.

The Commerce Commission has approved Transpower's proposal to recover up to $143 million of investment to manage voltage stability in the Waikato and Upper North Island region.

Transpower submitted a major capital expenditure proposal to the Commission in December 2019 for the first stage of a two-stage project related to the anticipated closure of major generation plants in the Waikato region. These closures could cause voltage management issues in Auckland and Waikato, particularly as the population grows and peak electricity demand increases.

Deputy Chair Sue Begg said the Commission agrees with Transpower that without this investment there would be an unacceptable risk to customers and the power system if faults occurred in the region during periods of high demand. This underpinned the Commission's draft decision in June to approve the proposal and was echoed by stakeholders in their submissions.

"We conducted a thorough evaluation of the proposal to ensure that it is appropriate and will deliver significant benefits to consumers by improving the resilience of the electricity system. We are grateful to stakeholders for their considered feedback on our draft decision, which has informed our final decision today," Ms Begg said.

"The impact of COVID-19 and the announced closure of the Tiwai aluminium smelter in Southland adds some uncertainty to forecast electricity demand, how soon the investment will be needed, and the potential costs of delivering the project.

"However, we consider the need for this investment remains. We're also comfortable that our final decision gives Transpower the flexibility through an incentive scheme and extended delivery timeframe to manage uncertainty and ensure that the money is invested efficiently."

The $143 million investment will increase transmission charges for some consumers.

"While we recognise that this will have some impact on consumer bills, the investment is needed to make sure the lights stay on and to safeguard the future stability of electricity supply to the region," Ms Begg said.

"As stakeholders requested, Transpower is also continuing to explore the scope for alternative solutions to meet the investment need. This includes grid-scale batteries that could defer more expensive investment in equipment. Transpower has committed to seeking an amendment to our final decision if it identifies a better alternative, and we expect it to follow through on that."