TrustPower Says Transmission Pricing May Stall Power Projects

By Gavin Evans

Aug. 5 (Bloomberg) -- TrustPower Ltd., operator of New Zealand's largest wind farm, said NZ$1.3 billion ($940 million) of wind and hydro-electric power projects it plans are unlikely to go ahead without a change in transmission pricing.

TrustPower has approval to build a 200-megawatt wind farm near Dunedin on the South Island and was today granted approval to build a 72-megawatt hydro project near Blenheim. Neither project, nor two others awaiting approval, are likely to proceed because of costs charged to South Island generators, TrustPower spokesman Graeme Purches said.

New Zealand, a signatory to the Kyoto Protocol on climate change, gets about 70 percent of its power from wind, hydro- electric and geothermal generators and wants to increase that to 90 percent by 2025 to reduce emissions. Almost two-thirds of proposed new wind capacity is on the South Island.

``The best opportunities to build sustainable energy are on the South Island, other than geothermal,'' Purches said. The government wants ``sustainable energy, but they won't give us transmission pricing to make it happen.''

TrustPower fell 5 cents, or 0.7 percent, to NZ$7.70 at 4 p.m. in Wellington. The Tauranga-based company is awaiting planning approval for a NZ$440 million, 240-megawatt wind farm near Gore, and a NZ$185 million dam on the South Island's west coast.

New Zealand's two major islands are linked by a set of high-voltage cables. They were laid more than 40 years ago to carry cheaper power from the nation's South Island dams to the more-populous North Island.

Regulator Ruling

In 2006, the Electricity Commission changed the pricing of transmissions through the link, imposing those costs only on South Island-based generators TrustPower, Contact Energy Ltd. and Meridian Energy Ltd.

The commission said the link gave these companies access to higher prices on the North Island. The pricing change would also encourage construction of power stations near the biggest cities and factories on the North Island, reducing spending on transmission and the waste of electricity as it is sent north.

All other transmission costs in New Zealand are pooled and passed on to consumers. The South Island generators were charged NZ$89.1 million for the link in the year ended March. They will share the NZ$672 million cost to increase its capacity to 1,000 megawatts by 2012.

Government-owned Meridian, operator of the nation's largest dams, went to court in 2005 in an unsuccessful bid to overturn the commission's pricing change.

``It's still an issue for us,'' spokesman Alan Seay said today.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net