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					       Presentation to
Energy Trusts of New Zealand

David Laurie – General Manager, National Grid,
          Transpower New Zealand
              28 September 2006
    Content

    • The importance of transmission to New Zealand

    • Role of the regulator in developing as strong grid

    • Interaction between network companies and
      Transpower to benefit all consumers




2
    Why transmission is important to New Zealand




3
    Transmission is important to New Zealand
    because….
                                • We don’t
                                  connect to any
                                  other country.
                                • We have to
                                  meet all of our
                                  own electricity
                                  needs.
                                • Geography
                                  dictates that
                                  our network will
                                  always be
                                  linear ie N-S.




4
    Transmission is important to New Zealand
    because… (cont)
    • Many of us
      live in places
      like this:




    • …and not
      many live in
      places like
      this:


5
    Transmission is important to New Zealand
    because…(cont)
     We’re running out of the capacity provided by the
     significant investment of the 50s and 60s:
                                                                                                  length built
                                                 3500                                                            45000
                                                                                                  Generated
       length of transmission lines built (km)




                                                                                                                 40000
                                                 3000
                                                                                                                 35000




                                                                                                                         electricity generation (GWh)
                                                 2500
                                                                                                                 30000




                                                                                                                                   mid-decade
                                                 2000                                                            25000

                                                 1500                                                            20000

                                                                                                                 15000
                                                 1000
                                                                                                                 10000
                                                 500
                                                                                                                 5000

                                                   0                                                             0
                                                        s

                                                                 s

                                                                 s

                                                                          s

                                                                                   s

                                                                                            s

                                                                                                           s

                                                                                                           s

                                                                                                         00
                                                     20

                                                              30

                                                              40

                                                                       50

                                                                                60

                                                                                         70

                                                                                                        80


                                                                                                si 90

                                                                                                       20
                                                   19

                                                            19

                                                            19

                                                                     19

                                                                              19

                                                                                       19

                                                                                                     19

                                                                                                     19

                                                                                                     e
                                                                                                  nc




6
    Transmission is important to New Zealand
    because…(cont)
    Our electrical demand keeps growing:
             2006 - A Winter of Records (so far)
              Item           New Record       % increase
                             (all in 2006)   on last record
    Total NZ Demand           6748 MW            3.6%

    North Island Demand       4505 MW            2.7%
    South Island Demand       2252 MW            1.3%
    Auckland/Northland        2133 MW            6.8%
    Demand
    Wellington Demand          646 MW            6.8%
    Christchurch and upper    1081 MW            4.0%
    South Island Demand

7
    Transmission is important to New Zealand
    because…(cont)
     Sometimes the demand is well in excess of what has been forecast:

    2,300
                           Auckland/Northland Peak demand
    2,250
    2,200                                                                ?
    2,150                          Actual, 2006 to
                                        date
                                                            ?
    2,100
    2,050
    2,000   Actual, 2005

    1,950
        2005                   2006                    2007              2008

                            Low       Medium         High       Actual
8
    Transmission is important to New Zealand
    because…(cont)
    Some statistics:

    • Since 1997 the amount of electrical energy carried
      by the grid has increased by 16%.

    • Electricity demand growth is forecast to continue at
      an average of about 2% a year over the next 35
      years.

    What do these mean?

9
     Transmission is important to New Zealand
     because…(cont)

                    • By
                       2015 usage expected to have increased by 27%
                    compared to 2005 to 47,000 GWh
                    • Consumption of electrical energy forecast to almost
                    double by 2045




10
     Transmission is important to New Zealand
     because…(cont)
      In its terms of reference for a new energy strategy, the
      Government has indicated a preference for renewable forms
      of energy to be exploited.

      This presents some technical and economic challenges
      since:

          • Economic wind, hydro or geothermal energy almost certainly
            does not coincide with areas of demand;

          • Renewable fuel sources can’t be transported to areas of
            demand, but their energy can.

      A robust transmission grid can provide a level playing field
      for new renewable energy generation options against fossil-
      fuelled alternatives.


11
     Summary of why transmission upgrades
     are important.
     • NZ’s power system is isolated from other power systems.

     • Highly populated areas are generally remote from the areas
       of high generation.

     • Demand continues to grow – unabated.

     • The existing grid is nearing its capacity.

     • Renewable generation options require a robust transmission
       grid.



12
       The role of the regulator
     in developing a strong grid




13
     Where does the regulator fit in?

     • Transpower is a monopoly provider of transmission
       services, so a regulator is needed to review:
        – Terms and charges for using the transmission network are
          fair and reasonable.
        – Solutions are not over-designed or over-built.
        – Transpower’s proposals are economically sound.


     • Since the suspension of the 400 kV proposal,
       Transpower has been working closely with the
       regulator to ensure a workable framework for
       assessing future investment proposals.


14
     Transpower’s Investment Proposals

     • Transpower prepares investment proposals that may form
       part of a formal Grid Upgrade Plan that is submitted to the
       regulator. See current Annual Planning Report on Internet.

     • Transpower must obtain approval from the regulator for any
       such investment.
        Approval means:
            • Transpower can include the project cost in its rated asset base.
            • Transpower can recover the costs of the project through its regulated
              rate of return.


     • Transpower anticipates approximately $4 billion of new grid
       investment from 2006 to 2016.


15
     Moving to the “holy grail” of transmission
     investment.
     • Ideally we want an environment where:
        – Transmission development is signalled well ahead of when
          it is needed through robust and transparent planning
          methodology;
            This allows consenting and property issues to be resolved early.
        – The electricity industry and business generally can plan with
          confidence around the well signalled plans of investment
          and a robust and transparent process for approving them;
            This allows others to make sensible plans.
        – Regulatory oversight enhances the investment decisions of
          the transmission company;
        – Investment is timely and with acceptable project risks;
        – There are clear responsibilities and accountabilities.
     • Do we have these here…..?

16
     Moving to the “holy grail” of transmission
     investment (cont).
     We’re heading in the right direction:

         - Transpower is incrementally improving its planning processes;
         - Transpower is being more transparent about its investment plans
           (publication of Annual Planning Report this year forecasting 10 years of
           issues and possible solutions);
         - Regulatory processes becoming more enshrined in Transpower’s
           project paths (e.g. RFIs, more obvious consideration of alternatives,
           preparation of proposals etc);
         - Both Transpower and the regulator continuing to learn from the
           inaugural application of the Grid Investment Test to a major
           investment (the 400 kV proposal);
         - The regulator has now approved some $200 million of
           Transpower’s investments representing about 30 projects.



17
     Ways in which networks and the grid need
     to interact for the benefit of all customers




18
     What we can do
     • Greater transparency:

        – Transpower’s Annual Planning Report (APR) highlights future transmission
          constraints and proposes possible solutions;
        – Transpower has joined the Electricity and Gas Complaints Commission
          scheme.
        – Transpower is committed to consulting on the needs and solutions with its
          stakeholders.

     • Better communication

        – Ensure that Transpower is structured to better interact and communicate
          with customers, stakeholders, communities using various forums and
          approaches.

     • Closer co-ordination to help secure New Zealand’s energy
       future

        – Regional planning forums with customers and others
        – MOUs with various national bodies
        – Transpower and Vector MOU to help secure Auckland’s power supply


19
     What we can do (cont).

          Work together to resolve issues of mutual interest
          and concern.

          Perhaps there are some common issues that affect many
          parts of the industry:

               »   Acquisition of property rights
               »   Consenting under the RMA
               »   Long term planning and co-ordination of investment
               »   Orthodox and consistent regulatory approaches
               »   Energy policy development




20
     In Summary
     •   NZ will always need a robust transmission grid that provides future
         certainty for investors.

     •   The grid needs to be upgraded to meet increasing demand for power
         across the country.

     •   Transpower has signalled the need for about $4 billion of investment
         over the next ten years.

     •   The processes for planning, assessing and approving transmission
         investments are improving all the time.

     •   Greater transparency, better communication and closer co-ordination
         between Transpower and its stakeholders will benefit all consumers.

     •   How can parts of the industry work better together?


21

				
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