We have decided to amend the TPM to change the way that the charges for the costs of the inter-island High Voltage Direct Current (HVDC) link are calculated.

As a result of the change, Transpower will recover the HVDC charges from South Island generators in proportion to the total amount of energy they inject into the national grid averaged over a multi-year period, on a MWh basis.

There will be a four-year transition period from the current way that HVDC charges are calculated. The amendment arises out of Transpower’s operational review of the TPM.

The new arrangements will promote the efficiency and reliability limbs of our statutory objective by addressing the incentive, under the current HVDC charge, for South Island generators to limit their maximum output, even when supply is tight in the market.

After consultation with Transpower, we have decided that the proposed changes will take effect from 1 April 2017, ie, for the calculation of prices for the 2017/18 pricing year and subsequent pricing years. As the capacity measurement period for the 2017/18 pricing year begins on 1 September 2015, this means that participants will need to take into account the impact of the change from 1 September 2015

The decisions and reasons paper can be found below.