Tiwai smelter may need to wait at least a year for Transpower discount but Rio Tinto says need is 'urgent'

Wednesday, 17 June 2020

NZAS chief executive Stewart Hamilton makes the case for intervention to save the aluminium smelter in October.

The 800 staff at the Tiwai Point aluminium smelter near Bluff may have to wait at least a year to find out whether their jobs are safe as a tug of war over its power bill continues.

The Electricity Authority last week paved the way for the smelter to apply for a discount potentially worth tens of millions of dollars a year on the transmission charges it pays Transpower to connect to the national grid.

But Transpower indicated on Wednesday that it might be at least a year before it was ready to consider any application.

Any discounts on transmission charges would need to wait on other decisions Transpower needs to make about how to implement a broader instruction issued by the authority for it to adopt more of a 'user pays' model for maintaining and upgrading the grid, it said.

Transpower spokeswoman Deborah Gray said the next step for Transpower would be to 'thoroughly review the requirements issued by the Electricity Authority'.

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'This will include how we will meet the requirements of the prudent discount policy.

'However, we agree with the authority that splitting off the prudent discount policy and addressing it early would risk delaying development of the transmission pricing methodology as a whole,' she said.

There may be no quick resolution to the uncertainties hanging over the future of aluminium smelter near Bluff.

'Transpower is required to deliver a proposal to the authority by the end of June 2021 for its consideration,” she said.

A spokeswoman for the smelter's majority owner, Rio Tinto, appeared to cast doubt on whether it was prepared to wait that long.

“For over a decade, New Zealand Aluminium Smelter has been overcharged for transmission infrastructure it does not use. This has undermined its competitive position in comparison to other aluminium smelters globally,' she said.

'New Zealand will not be able to continue producing low carbon aluminium for domestic and export markets if this fundamental issue cannot be addressed urgently.”

Smelter chief executive Stew Hamilton warned last week that the authority's changed guidelines on prudent discounts did not appear to provide any relief for the smelter 'in the short term' because Transpower had yet to develop the detailed rules.

Rio Tinto had signalled it would make a decision on the future of the smelter by the end of March this year, which could see it fully or partially close.

However, it has not since provided a revised date for the completion of its review or even confirmed whether it is still ongoing.

In addition to lobbying for a reduction in its transmission bill the smelter has been attempting to negotiate a one-third reduction in the price it pays Meridian and Contact Energy for power.

The smelter is not the only heavy-industry facility that is considering downsizing.

Refining NZ is reviewing the future of its Marsden Point oil refinery in the wake of a collapse in refining margins and has suggested it could switch to importing and distributing pre-refined fuels.

NZ Steel began consulting last month on a proposal to close its steel pipe and hollows making operations at its Glenbrook steel mill with the potential loss of 60 jobs.