24 December 2014

Transpower: Vector v. Transpower

Transpower has benefited from some double dipping.  Auckland power utility Vector failed in its argument that Transpower owed it a refund of $3.2 million for charges levied while a new main transmission line was pushed through central Auckland.  At issue was the question of who bears transmission costs during the staged development of Transpower infrastructure.
The High Court ruled that Transpower could levy all users for the cost of a transmission grid upgrade while at the same time charging an individual power utility for using part of the upgrade while still under construction.
During 2013-2014 Transpower strengthened its Northland network by constructing a new transmission line from Penrose to Albany through central Auckland.  Transpower’s income is derived from transmission charges levied against those drawing down from the grid.  The main grid is an “interconnection asset”.  Power can flow in either direction through the grid   Costs are “socialised”.  The cost of building and maintaining the grid interconnection is spread across all lines companies and a few major electricity users since supply to individual recipients cannot be easily metered.   By contrast, users at the end of a spur line are charged individually for power taken.  Power flows only one way and can be metered.    
The High Court was told Transpower socialised proposed costs of the Penrose/Albany interconnection on the assumption that this upgrade would go live as one completed project.  Because of construction delays, one section across part of Auckland’s North Shore went live nine months before completion of the entire project.  Vector was sole user of this section of the project for these nine months.  Transpower treated this stage of the link as a spur and billed Vector $3.2 million for power carried during the period of Vector’s sole use.
Having paid the $3.2 million invoice, Vector demanded repayment.  It was being asked to pay twice for a transmission upgrade: first as its share of the “socialised” interconnection construction costs; and secondly for its nine months usage prior to commissioning of the final project.
Justice Williams ruled no refund was required.  A 2010 participation code forming part of the Electricity Industry Act defines what is an interconnection asset and what is a spur.  The code speaks in the present tense and recognises that a particular transmission link can change at any given time between interconnection asset and spur.  For the nine months in question, Vector’s use of the first commissioned stage of the planned interconnection link was use of the link as a spur.
The Electricity Authority says individual utilities can negotiate with Transpower over transmission charges to be levied on interim use of those parts of a staged development which are temporarily operating as a spur.
Vector v. Transpower – High Court (24.12.14)
15.005