The Commerce Commission has formally approved $23.5 million for Transpower to replace the conductors (overhead wires) and strengthen the structures of a 9.5km section of its high voltage direct current (HVDC) transmission network in Wellington.
The Commission’s final decision is unchanged from the draft released in August, which also approved a further $2 million in funding for Transpower to pay for the expected additional electricity reserve costs it could incur as part of this project.
Transpower’s HVDC network transmits bulk electricity between the North and South Islands. Its main use is to transmit electricity generated from hydro dams in the South Island to where it is consumed in the North Island.
Deputy Chair Sue Begg said the approved funding will be used to replace aging wires in Churton Park that have an increased risk of failure.
“Ensuring the security of the HVDC network is a priority for Transpower, and we agree this work is needed. We expect Transpower to begin replacing these wires in late 2019 as this timing would align with the other replacement work already planned on one of the HVDC converter stations,” Ms Begg said.
“We consider that Transpower’s proposal minimises the impact of reduced transmission capacity, while being the least disruptive to the market.”
The cost of the project would be added to Transpower’s base capital expenditure allowance and recovered from its HVDC network customers. The expected impact on the average residential consumer is less than three cents per month.
A copy of the Commission’s final decision and the submissions it considered during this process can be found here.
The Commission regulates the electricity transmission line services that Transpower supplies to consumers through an individual price-quality path (IPP) under Part 4 of the Commerce Act. When setting the IPP, we approve Transpower’s base capital expenditure allowance for each of the 5 years the regulatory period covers – the current period runs from 2015 to 2020.
Transpower’s regulatory regime allows for separate approval for ‘listed projects’, where forecast costs and timing are uncertain. The Churton Park HVDC project is the second listed project application that Transpower has submitted.
In assessing a listed project, the Commission reviews whether the project is necessary and whether Transpower’s proposed solution is the most reasonable and cost-effective. The Commission may then, at its discretion, approve the amount of funding it considers necessary to undertake the work, and add this to Transpower’s base capital expenditure allowance for the remaining years of its regulatory period.
Reserves in the electricity market are required to protect against a sudden failure of a large generating plant or the HVDC link. The reserve costs are paid by electricity generators and Transpower as the owner of the HVDC network. These costs are allocated to generators in proportion to the quantity of electricity they inject into the grid, and to Transpower in proportion to the quantity of electricity the HVDC transfers. When Transpower undertakes this reconductoring project one of the two transmission poles at Haywards will be out of service. This mean that should any outage occur on the pole that remains in operation, the load could not be covered by the other pole. As a result, Transpower will be exposed to higher reserve costs.