Consumers in the upper North Island would face the biggest increase in national electricity grid charges under the Electricity Authority's proposed changes to transmission pricing.
Proposed changed could also mean the Rio Tinto-controlled aluminium smelter at Tiwai Point would get less than half the benefit it may have hoped for.
The authority released a consultation paper on transmission pricing that proposes replacing the current two main charges -- $150 million a year for the HVDC link between the North and South islands and an interconnection charge of $639 million a year, with two new charges: an area-of-benefit (AoB) charge of $296 million and a residual charge for Transpower's costs of $500 million a year, spread across the country.
Because consumers in Auckland and the Far North have received the biggest benefits from upgrades of the national grid, ensuring the nation's biggest city has one of the most reliable power supplies, they would face the biggest increases under an AoB regime, the authority said.
But the authority says the overall impact on electricity consumers would be "very modest", amounting to a 0.5 percent average increase, or $11 a year.
The current transmission pricing methodology (TPM) was flawed because it isn't service-based and doesn't reflect actual costs, authority chief executive Carl Hansen told a media briefing in Wellington.
The authority is embarking on 10 weeks of consultation over the proposed changes, aiming to have final decisions on the TPM by October.
The issue has been running for years without resolution and centres on whether South Island power generators and consumers pay too much to access the grid, given $2 billion of upgrades over the past five years has bolstered security of supply for North Island customers.
The smelter would get an estimated benefit of $20.8 million -- less than half the $50 million upside mooted in proposals the authority put out for discussion last year.
The Tiwai Point smelter's operator has viewed the decision as an important factor in determining whether it can continue to run at full capacity, scale back production, or quit the New Zealand operation altogether.