Change could cut smelter power bill

The future of the Tiwai Point Aluminium Smelter appears brighter thanks to a proposed rule change which could cut its massive electricity bill.

This comes as majority owner Rio Tinto carries out a strategic review, which it has indicated could result in the closure of the smelter and the loss of about 800 jobs.

However, a proposed change by the Electricity Authority (EA) announced yesterday could open the way for Tiwai Point to apply to pay lower transmission costs to Transpower, which currently cost it between $60million and $70million a year.

New Zealand Aluminium Smelter (NZAS) has argued the amount it pays to source power from the Manapouri power station is unfair given it uses such a small amount of the network.

The proposed changes announced yesterday would, if given final approval, open the way for NZAS to apply for a ‘‘prudent discount’’ for its transmission charges.

The change would allow customers to apply to pay the ‘‘standalone cost’’ of transmitting power.

This would be equivalent to the cost the customer would incur today to pay for its own transmission outside of the national grid.

In a consultation paper which discussed the changes, the authority acknowledged some customers get ‘‘below-average benefits from the grid (perhaps because they are located close to generation)’’ while paying large costs.

A previous proposal would have forced customers to prove they could bypass the network and build their own network, but in its new proposal the authority acknowledged issues with this approach.

‘‘For example, Rio Tinto submitted that it would be impossible to obtain a resource consent for construction of a duplicate transmission link through pristine wilderness.

‘‘In such a situation, the cost estimated using a real-world business case for bypass of the network could be prohibitive.

‘‘It suggested an alternative is to place an upper limit on transmission charges at the standalone cost of supply.’’

NZAS said it could not reply to a request for comment by deadline yesterday, but chief executive Stew Hamilton previously told the Southland Express the amount it was paying for transmission was unfair.

‘‘We absolutely should be paying for transmission. We use the service, we are a large consumer of electricity [and] use about 12% of New Zealand’s power.

‘‘However, we don’t think we should be paying such a significant amount for that service to get power from a dedicated power station to ourselves.’’

A spokeswoman for Energy Minister Megan Woods said she had not ‘‘intervened’’ and the proposal was an operational matter for the Electricity Authority.