Starting BBI customer allocations

This page includes current and closed consultations on starting BBI customer allocations, as well as determinations where these have been made.

Overview

Benefit-based investments (BBIs) are investments in interconnection assets and interconnection transmission alternatives (interconnection investments). They typically include investments in the replacement and refurbishment of existing interconnection assets and transmission alternatives that avoid or defer the need to invest in interconnection assets.

Benefit-based charges (BBCs) recover the costs of a BBI from customers identified as expected beneficiaries of the BBI.  

The transmission pricing methodology (TPM) requires Transpower to consult on how BBCs are allocated to those customers (starting BBI customer allocations).

Current and recent consultations on starting BBI customer allocations

Closed consultation: Proposed starting BBI customer allocations for NZGP Phase One CNI and HVDC Reactive Support projects

Our consultation on the proposed benefit-based investment (BBI) starting customer allocations for two (out of three) components of the Net Zero Grid Pathways (NZGP) phase one project has now closed. Submissions were due by 5pm Wednesday, 06 September 2023. We did not receive any submissions and so there will not be a cross-submission period.

The NZGP team submitted a major capex project (MCP) proposal to the Commerce Commission (Commission) in December 2022 and sought further views on a preferred option after discussions with the Commission. Our proposed starting customer allocations for these two investments are not affected by the change, so we aligned consultation periods. You can read the NZGP updated preferred option consultation documents and submissions received here.

 

Consultation package

 

Additional modelling information released after consultation period

On 23 May 2024, we published additional modelling information  to supplement the information already provided in the TPM consultation for the proposed BBI customer allocations for the NZGP Phase One Central North Island (CNI) and HVDC Reactive Support projects.

Additional information includes:
•Further generation expansion scenario detail
•The transmission constraints used to derive the generation expansion scenarios
•Further explanation on the transmission constraints used for the starting BBI customer allocations SDDP dispatch simulations

Click here to download an overview of the additional modelling.

Click here to download the additional modelling.

 

NOTE: We consulted on our proposal to treat the components of the MCP as separate BBIs and the proposed starting BBI customer allocations (calculated using the pricing-quantity method under the TPM) for two of the three components of the MCP - specifically the Central North Island (CNI), and the High Voltage Direct Current (HVDC) Reactive Support components. We did not consult on one component of the MCP proposal, which relates to work in and around Wairakei. We plan to calculate and consult on allocations for this component once the Commerce Commission makes its decision on Transpower's Capex IM (the decision will determine whether we use the simple or standard method to calculate proposed starting customer allocations, both of which are outlined in our BBC Assumptions Book).

 

Consultation process

We commenced this consultation on Thursday 27 April 2023. Submissions were due by 5pm Wednesday, 06 September 2023. No submissions were received. Following the Commission’s decision whether to approve the MCP proposal, we will finalise calculations of the starting customer allocations for the CNI and HVDC Reactive Support BBIs.   

 

We welcome your feedback on our consultation approach 

The new TPM came into effect on 1 April 2023. This is the first time we have consulted on proposed starting customer allocations when the investment decision by the Commission is unknown. Should the Commission's process result in changes to the MCP, we may need to consult again. 

Consulting on proposed starting customer allocations now ensures customers have information about any allocation they would receive for the proposed NZGP investments prior to the Commission's consultation process. Starting customer allocations are used to calculate an investment's benefit-based charges.

We welcome any feedback you may have on our consultation timing and approach. You can email us at [email protected]. 

 

Previous consultations and determinations on starting BBI customer allocations 

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 2025/26 financial year, 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 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 consulting 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. 

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.

 

BBI commissioning dates and assumptions book versions

 

Benefit-based investment

 

Commissioning date

 

Assumptions book version
WUNIVM Stage 1b - OTA STATCOM11 March 2025V1.1
HVDC Pole 2 refurbishment7 February 2023V1.1
WUNIVM Stage 1a - HAM STATCOM15 December 2022V1.1
CUWLP15 November 2020V1.0

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