BBI starting customer allocations

Click here for current and upcoming TPM consultations. See our TPM decisions page for all decision documents, consultation documents, submissions and cross-submissions for past (non benefit-based investment) consultations. 

Determination of the starting BBI customer allocations for WUNIVM1b OTA STATCOM

We published the starting customer allocations for stage 1b of our Waikato and Upper North Island Voltage Management Project (WUNIVM Stage 1b) BBI under the TPM in November 2023. Along with its covered costs, the starting customer allocations are an input to calculating the WUNIVM Stage 1b benefit-based charges.

As required by the TPM, we have calculated customer allocations we consider are broadly proportionate to the positive net private benefit each customer is expected to derive from WUNIVM Stage 1b, taking into account a reasonable range of possible futures.

We expect the investment to be commissioned during the current financial year (2025/26), which means the relevant benefit-based charges (BBCs) will apply from pricing year 2027/28.

Determination documents

Consultation process

On 31 August we started consulting on the proposed starting benefit-based investment (BBI) customer allocations for (WUNIVM stage1b) - the Ōtāhuhu Substation STATCOM - calculated under the transmission pricing methodology (TPM). Submissions were due by 5pm on Friday 29 September 2023. We did not receive any submissions. Consequently, the cross examination was cancelled. 

Consultation package

More information

WUNIVM is a staged project to efficiently manage voltage in the North Island, as thermal generation exit and region and load grows. It was approved by the Commerce Commission in September 2020. Previously, we consulted and determined the starting allocations for a Hamilton (HAM) Substation STATCOM. We are treating the OTA and HAM STATCOM investments as separate, as they have different decision dates and different commissioning timelines.

Under the TPM these are considered high value BBIs as their cost is expected to exceed $20m. We are applying the resiliency method because the primary purpose of the STATCOM is to mitigate a risk of cascade failure in the North Island. 

Determination of the starting customer allocations for the CUWLP BBI

We published the starting customer allocations for the Clutha Upper Waitaki Lines Project (CUWLP) benefit-based investment (BBI) under the new TPM in September 2022. Along with its covered costs, the starting customer allocations are an input to calculating CUWLPs benefit-based charges.

As required by the new TPM we have calculated customer allocations we consider are broadly proportionate to the positive net private benefit each customer is expected to derive from CUWLP, taking into account a reasonable range of possible futures.

Determination documents

The determination package on the starting customer allocations for the CUWLP BBI includes:

 

Consultation process

The consultation period was 4 weeks, and began Tuesday, 17 May 2022. Submissions were due by 5pm Tuesday, 14 June 2022. Cross-submissions were due by 5pm on Tuesday, 21 June 2022. We received nine submissions and six cross-submissions. Feedback received reinforced there is no single ‘right’ answer to who privately benefits from CUWLP over the 20-year calculation period, or the relative benefits to each beneficiary. This consultation was on the proposed starting benefit-based investment (BBI) customer allocations for the Clutha and Upper Waitaki Lines Project (CUWLP), which we have calculated under the new Transmission Pricing Methodology (TPM) the Electricity Authority announced on 12 April 2022.

 

Consultation package

The CUWLP BBI consultation package included:

 

Submissions

 

Cross-submissions

 

Online drop-in session

On 25 May 2022 we hosted an online drop-in session for stakeholders to ask questions and seek clarifications about the consultation. The session was recorded and transcribed for interested parties unable to attend on the day. The session slides are also available.

 

More information

Under the new TPM, certain capex and opex costs of a BBI (the BBIs covered cost) must be recovered by Transpower from beneficiary customers through benefit-based charges (BBCs). CUWLP is considered a high value post-2019 BBI under the new TPM. As such, we have used the price-quantity method to determine beneficiary customers and calculate their starting BBI allocations. The price-quantity method is one of two standards methods for high-value BBIs, as outlined in the first edition of the BBC assumptions book.

The starting BBI customer allocations for CUWLP are an input into calculating customer benefit-based charges (BBCs). A customer’s starting BBI customer allocation is equal to the positive net private benefit (EPNPB) expected to accrue to the customer from CUWLP, if any, as a percentage of total EPNPB across all customers. We have used the price-quantity method because its primary investment need is to alleviate, or prevent, transmission constraints that are expected to exist in the wholesale electricity market if CUWLP did not occur. 

CUWLP was approved by the Electricity Commission in 2010 as part of the Lower South Island Renewables Investment. Transpower announced its decision to proceed with CUWLP in June 2020. CUWLP was effectively fully commissioned in April 2022. In TPM terms, this means CUWLP’s expected effective full commissioning date occurred in the financial year (FY) 2021/22. CUWLP is a post-2019 BBI that is expected to be high value when fully commissioned. 

We published an initial case study application of the price-quantity method to CUWLP as part of our 30 June 2021 TPM proposal. The starting BBI customer allocations and BBCs in that case study were indicative only and subject to change. The proposed starting BBI customer allocations we are now consulting on have been calculated in accordance with the TPM as approved by the Electricity Authority.

Determination of the starting customer allocations for the HVDC Pole 2 refurbishment BBI

We published the starting customer allocations for the HVDC Pole 2 refurbishment benefit-based investment (BBI) under the new TPM in June 2023. Along with its covered costs, the starting customer allocations are an input to calculating the HVDC Pole 2 refurbishment benefit-based charges.

As required by the new TPM we have calculated customer allocations we consider are broadly proportionate to the positive net private benefit each customer is expected to derive from the HVDC Pole 2 refurbishment, taking into account a reasonable range of possible futures.

We expect the investment to be commissioned during the current financial year (2022/23), which means the relevant benefit-based charges (BBCs) will apply from pricing year 2024/25.

Determination documents

 

Consultation process

On 19 January 2023 we started our consultation on the proposed starting benefit-based investment (BBI) customer allocations for the high voltage direct current (HVDC) Pole 2 converter transformer refurbishment (Pole 2 refurbishment), used to calculate the investment's benefit-based charges (BBCs) under the new TPM. This is a high value BBI (estimated $33.5m) and we are applying the price-quantity method (see the first draft of the BBC assumptions book).

Submissions were due by 5pm Thursday 9 March 2023 (originally by 5pm Thursday 23 February 2023). One submission was received: Meridian Energy - Submission on HVDC Pole 2 Refurbishment: Proposed starting BBI customer allocations. We did not receive any cross-submissions (which were due 5pm Thursday 23 March 2023).

 

Consultation package

The consultation package included:

 

More information

You can read more about the HVDC Pole 2 converter transformer refurbishment project here.

Determination of the starting customer allocations for Stage 1a of the WUNIVM Stage 1a project benefit-based investment (BBI)

We published the starting customer allocations for stage 1 a of our Waikato and Upper North Island Voltage Management Project (WUNIVM Stage 1a) BBI under the new TPM in June 2023. Along with its covered costs, the starting customer allocations are an input to calculating the WUNIVM Stage 1a benefit-based charges.

As required by the new TPM we have calculated customer allocations we consider are broadly proportionate to the positive net private benefit each customer is expected to derive from WUNIVM Stage 1a, taking into account a reasonable range of possible futures.

We expect the investment to be commissioned during the current financial year (2022/23), which means the relevant benefit-based charges (BBCs) will apply from pricing year 2024/25.

 

Determination documents

 

Consultation process

On 15 December 2022 we started consultating on the proposed starting benefit-based investment (BBI) customer allocations for (WUNIVM Stage 1a) - the Hamilton Substation STATCOM - calculated under the new transmission pricing methodology (TPM). Submissions were due by 5pm on Thursday, 09 February 2023. We did not receive any submissions. Consequently, the cross-submission period was cancelled.

 

Consultation package

The consultation package included:

 

More information

WUNIVM is a staged major capex project. The purpose of the project is to continue to meet the grid reliability standards by maintaining voltage in the Waikato and Upper North Island region (and ultimately the entire North Island) for the security of the power system. Stage 1 of WUNIVM was approved by the Commerce Commission in September 2020 in accordance with the Transpower Capex IM, which allows Transpower to recover up to $143m of investment to manage voltage stability in the region.

There are four components of Stage 1. In November 2020 Transpower decided to proceed with the first component (Stage 1a): A ±150 MVAr dynamic reactive device known as a STATCOM (a type of electrical plant that provides or absorbs reactive power) at Hamilton substation.

Under the new TPM it is considered a high value BBI as it's cost is expected to exceed $20m (at the time of this consultation the estimated capital cost when fully commissions is $43m). We are applying the resiliency method (for the first time) because the primary purpose of the STATCOM is to mitigate a risk of cascade failure in the North Island.