In a statement, Transpower, the national grid operator, said it had submitted an investment proposal with the Electricity Commission to replace pole 1 of the HVDC interisland cable link.
The cable is made up of two poles. Pole 1, built in the early 1960s, was taken out of service last year because of worries about its reliability.
However, it has been returned to service for use in critical periods. Pole 2 continues to operate without any trouble.
Transpower chief executive Patrick Strange said the investment in the upgrade follows months of consultation.
The HVDC link was an important link for New Zealand, moving power from one island to the other.
The capacity would increase to 1000MW from 2012, and 1200MW from 2014. At present, the capacity is at 700MW.
An Electricity Commission spokesman said if people or companies wanted to make submissions on the project, the commission would organise a public hearing.
The commission was set to release its final decision to approve the project at the end of September.
The commission has to justify the upgrade under its grid investment test before granting approval.
In a letter to Transpower, Contact Energy said it did not believe Transpower's analysis was sufficiently robust to conclude the replacement of pole 1 should start immediately.
Contact Energy, which operates the Clyde and Roxburgh dams, believed it was better to wait and watch generation demand over the next two to three years before revisiting the decision.
Contact Energy spokesman Jonathan Hill said the concern centred around South Island generators having to pay for the upgrade.
The link was increasingly being used to move power from the North Island to the South Island, to the benefit of North Island generators
He said Contact Energy had not made a decision yet on whether it would make a submission to the Electricity Commission hearing.
Meridian Energy, which operates the Manapouri dam and the Waitaki hydro scheme, said in a letter to Transpower it believed Transpower had underestimated the growth in power demand in the South Island, which had an impact on the benefits of the HVDC upgrade.
It feels calculations by Transpower should include projections on economic growth, not just on population growth. It wanted Transpower to do its analysis again.
Meridian Energy spokeswoman Claire Shaw could not be contacted.
