Tuesday, July 16, 2024

Commerce Commission gives geothermal connection go-ahead

The Commerce Commission has issued a draft decision proposing to approve Unison Networks Limited’s application to increase its allowed revenue to cover the $7.3 million cost of connecting Contact Energy Limited’s Tauhara geothermal power plant to Unison’s network. 

Unison is the electricity distribution business that owns and operates the electricity lines network in the Hawke’s Bay, Rotorua, and Taupo regions. The Commission caps revenues for Unison and 15 other lines companies as part of its functions of regulating natural monopolies under Part 4 of the Commerce Act.

“Unison’s revenue cap was set by the Commission in November 2019 for a regulatory period of five years and cannot be adjusted during this time except in limited specified circumstances,” the Commission said in a statement today.

“One of the specified circumstances is if a lines company identifies a project that meets the criteria for an ‘unforeseeable major capital expenditure project’. This was the basis of Unison’s application.”

It said the project will supply electricity to enable Contact to construct the 150-megawatt Tauhara power plant, and subsequently provide a permanent supply from Unison’s network for operating the power plant once it is commissioned in mid-2023. Transpower’s national grid will transport the renewable electricity the geothermal power plant generates to supply consumers.

“The draft decision reflects the Commission’s view that the project meets the criteria for an ‘unforeseeable major capital expenditure project’ under the Commission’s rules.”

“The Commission considers that when it set the cap on Unison’s revenues in 2019, there was insufficient certainty about the timing of construction of the Tauhara power plant and whether it would be supplied by Unison’s network. It was therefore reasonable for Unison to not include the project in the forecast provided to the Commission in 2019 when it set the cap on Unison’s revenues.”

The Commission seeks interested parties’ views on its draft decision by 15 December. If finalised, the decision will allow Unison to recover the project’s capital costs through revenues over the life of the assets. 

The draft decision is on the Commission’s website.

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