Transpower House, 96 The Terrace,
PO Box 1021, Wellington,
New Zealand
Telephone +64-4-495 7000
Facsimile: +64-4-495 7100
Tim George
Tel: 04 495 6949
Fax: 04 494 6779
[email protected]
www.transpower.co.nz
11 June 2007
Mervyn English
General Manager
Electricity Commission
PO Box 10041
WELLINGTON
Dear Mervyn
NIGU proposal - final questions
Thank you for the opportunity to respond to a number of issues arising from the recent public
conference that you addressed in your letter of 5 June 2007 on Transpower’s North Island
Grid Upgrade (NIGU) reliability investment proposal.
Answers to the various questions and sub-questions are presented as follows:
Appendix A – Question 1 of 5 June Letter
Appendix B – Question 2 of 5 June Letter
Appendix C – Question 3 of 5 June Letter
Appendix D – Question 4 of 5 June Letter
Appendix E – Question 5 of 5 June Letter
Appendix E1 - Recommendation (a)
Appendix E2 - Recommendation (b)
Appendix E3 - Recommendation (c)
Appendix F – Question 1 of 5 June Letter’s Appendix
Appendix G – Question 2 of 5 June Letter’s Appendix
Appendix H – Question 3 of 5 June Letter’s Appendix
Appendix I – Question 4 of 5 June Letter’s Appendix
These are followed by two reference appendices:
Appendix J – Betterment – Increase in Injurious Effect
Appendix K – Transpower Easement Conditions
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I trust these answers assist the Commission. While appreciating that time is of the essence,
my team and I are happy to provide any further clarification that the Commission requires.
Yours sincerely
Tim George
General Manager Grid Investment
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Appendix A – Question 1 of 5 June Letter
Question 1 Please confirm whether Transpower has budgeted within the costs for which
approval is sought for likely measures, for example, the use of monopoles, more
undergrounding etc, which may be required to mitigate any adverse environmental effects of
its Proposal Please provide evidence of how these costs have been budgeted for.
Transpower has budgeted for what it considers at this stage are appropriate environmental
mitigation measures.
The expected or “P50” costs used as a basis for justifying Transpower’s reliability investment
proposal for the NIGU were based on the design outlined in that proposal. That design was
achieved through application of the ‘ACRE’ (Area-Corridor-Route-Easement) process which
provides a framework to identify effects and avoid remedy or mitigate these in accordance
with the requirements of the RMA. Extensive consultation was undertaken at various stages
through this process. The output represents a proposal that has already sought an optimum
solution across the various stakeholders and affected parties, given the information available
at the time. For example, while (given a need for a line) some parties prefer lower tower
heights, directly affected farmers typically prefer higher tower heights and longer spans.
Extensive consultation formed the basis of refining the positions of both the indicative centre
lined and associated towers from those originally announced in July 2005. As a result by
October 2005 there had been changes to approximately two-thirds of the preliminary tower
locations - and therefore to the indicative centre line, while Transpower sought to improve the
alignment.
In some cases, properties that were not crossed by the indicative centre line back in July
2005 became directly affected. A wide range of factors were taken into account, including
visual effects, environmental and heritage issues. Transpower acknowledged in November
2005 that the line had moved to such an extent that landowners needed more time to give
feedback on the revised centre-line. As a result consultation was extended further - and the
results of this consultation reviewed by Transpower staff and consultants with expert
specialist knowledge in the areas of property, engineering, planning, landscape architecture,
agriculture, tourism and recreation, environmental, social and cultural issues before a final
decision was made on the centre line and tower locations in January 2006.
The trade-offs between multiple interests, while maintaining reliability standards and good
electricity industry practice, meeting the need date and seeking to minimise project costs, are
complex. Transpower acknowledges that new information has emerged and will continue to
emerge since then that may affect some of the trade-offs. The lodging of the NOR and the
subsequent RMA processes provide the opportunity for all information to be ‘tabled’ and
those trade-offs to be made within the appropriate legal framework. Transpower is not yet of
the view that use of monopoles and more undergrounding is “likely”, but is entering the RMA
process with an open mind to such issues.
The “P90” costs for which approval has been sought include a contingency of $105 million to
allow for, amongst other things, further design refinement during the RMA process. This
contingency amount was increased in the amended proposal by $30 million over the original
proposal.
Because a project of this scale has not been recently completed under the current RMA
processes, it is difficult to determine the probabilities of different design refinement and
hence cost outcomes that might arise through the RMA process. Thus, Transpower’s
estimates of the contingency amounts required for this may turn out, with the benefit of
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hindsight, to be overly optimistic or pessimistic. They remain however Transpower’s best
estimates.
The consequence of this is that the “P90” costs for which approval is sought may have a
probability of being exceeded of more or less than 10%. Transpower will endeavour to
achieve the most appropriate outcome that satisfies Transpower’s statutory obligations under
the RMA, while maintaining reliability standards and good electricity industry practice,
meeting the need date and seeking to minimise project costs. If through RMA requirements
the approved costs are forecast to be exceeded, Transpower will advise the Commission at
the earliest opportunity that it may for this reason seek an amendment of project scope under
Rule 17.2.
It is possible that some changes resulting from the RMA process would take the project out
of the scope of the project that Transpower has sought approval for, described in section 2.1
of Transpower’s October 2006 application. For example, approval has been sought for
undergrounding to the vicinity of the South Auckland urban boundary, and for the new line to
be of steel lattice tower construction. Significant changes to the amount of undergrounding
or tower designs, for example, could fall outside this scope. If such a scope change was
required, Transpower would need under Part F to seek Commission approval for it under
Rule 17.2, which would include a commensurate change to the approved amount.
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Appendix B – Question 2 of 5 June Letter
Question 2. In particular, the Commission would appreciate Transpower's advice on whether
it has adequately allowed for easements and property costs of the type raised by the Perry
Group and others, and impacts on farm infrastructure and farming operations as referred to
by R Storey and others.
Transpower notes comments from a number of submitters, but based on the information that
Transpower has, the mitigation measures that Transpower has in place, the historical cost of
properties that Transpower has purchased, and the cost of easements that Transpower is
currently negotiating, Transpower has adequately allowed for easements and property costs.
The construction of the transmission line may have some temporary affects on properties.
Permanent affects are compensated through the payments made for the easement and the
associated injurious affection to the remainder of the land. Temporary disturbance is
generally associated with how construction access is obtained to the tower and stringing
sites and what land use the construction company might need to install foundations,
prefabricate and install towers.
Transpower is proposing to use an Alliance contract for the transmission line, with one driver
for this being the ability for such a contract to minimise temporary disturbance to land or
farming operations. Alliance contracts permit a more flexible approach which will enable
Transpower and the construction company to work with the landowner to achieve an
optimum outcome.
However, there will be times when temporary disturbance does cause costs for the
landowner, and Transpower has allowed for this through the inclusion of an expected
variance in the access track costs of up to 100%.
The following are comments on the specific issues raised by the submitters
Transpower agrees that there will be some disruption to the landowners during construction
on the line but not to the extent that has been stated by some submitters. The scale of the
expected effects and the mitigation measures have been fully documented in part VIII of the
Notice of Requirements (NoR) that has been submitted to the councils. The NoR contains a
large amount of information and for brevity a few of the most salient points relating to the
impact on farm operations are included here:
Vehicular access is required for construction and maintenance and the use of existing farm
infrastructure is preferred. Where any new tracks need to be formed the location of the tracks
will take account of topography and owners preferences.
There will be between 15 and 50 heavy vehicle visits and up to 100 light vehicle visits per
site, depending on the site.
The work at the sites will be split into a number of distinct phases, tower foundations, tower
structure erection and conductor installation:
•
Tower foundation construction is plant intensive and there will be up to 40 cubic metres
(10 truckloads) of material from foundations removed from the site and a similar
amount of concrete brought onto the site. Each is expected to take about 7 to 10 days.
•
The assembly and erection of the tower structures is expected to take about 10 days at
each site and the laid out steel members assembled components and working room for
plant will take up to 3600 square metres.
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•
The conductor installation will have a very low impact on the majority of properties as
the conductor stringing equipment will only need to be positioned every 3 to 5 km.
It is also important to look at the size of the problem. Of the 298 landowners there are 85
owners that do not have towers on the properties. Transpower has drafted 90 access
reports and presented them to 78 landowners already. Transpower owns or has agreements
to buy 57 of the properties and more agreements are pending: most of these are properties
that have towers located on them..
Relocation of existing buildings and facilities under the line
Part of the ACRE process involved minimising the effects on the existing environment
including existing infrastructure. The alignment that has been chosen by Transpower tried to
avoid as many existing buildings as possible but, unfortunately all building could not be
avoided. In a number of instances they have been properties where the impact on buildings
has been significant.
One of the recent submissions to the Electricity Commission indicated that there may be a
requirement to rebuild a milking shed at a cost of approximately $700,000.
Whilst it is not practical to discuss in this letter details of each instance where the works will
require the removal of farming infrastructure, each instance will be dealt with in confidence
with the property owner. Transpower has identified a number of cases where relocation of
existing buildings and facilities under the line is likely to be necessary: the costs of these
have been allowed for in Transpower’s cost estimates.
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Appendix C – Question 3 of 5 June Letter
Question 3. Based on the information provided by Regis Park Stage 2 Limited (which the
Commission provided at the meeting of 29 May 2007), please confirm whether Transpower
considers it has allowed sufficient cost contingency within its application to use GIS at
Brownhill Road, if this becomes necessary.
Transpower has sought approval to “Plan the works, including the acquisition of
designations, consents and easements to allow for future upgrade to 400 kV operation
through future addition of […] a new switchyard in the vicinity of the transition station with
new 400/220 kV transformers and associated works”. A likely location of this switchyard is
Brownhill Road, on land that Transpower owns.
Approval is sought only for the acquisition of designations, consents and easements for the
switchyard, not for the capital cost of its construction. Its construction is likely to be after
2020, and separate approval will be sought for this as and when necessary. Obtaining
approval for easements prior to construction in this manner reflects Transpower’s staged
approval approach to grid upgrades, as a means to manage the risk of asset stranding and
hence of inefficient costs.
The scope of the approval sought does not state whether the switchyard will be AIS or GIS.
The costs however are based on the assumption that it will be AIS. A GIS switchyard would
cost approximately $12 million more, in 2006 dollars, than AIS. However, this is equivalent to
an expected net market benefit difference of only about $2 million, as the additional cost
would be incurred in two stages well into the future, nominally in 2021 (220 kV stage) and
2033 (400 kV stage). These costs allow only for capital including earthworks. A detailed
assessment of costs and benefits at the time may show that the higher reliability, lower
maintenance costs and longer life of the GIS could further compensate for any cost
differences.
Supporting the NIGU proposal, the capital costs of the switchyard’s construction is a
modelled project (or strictly, a sequence of modelled projects) from 2021. The question
could also be asked as to whether, if it were assumed to be GIS rather than AIS, this would
affect the ranking of the proposal relative to alternatives in the GIT. The maximum effect on
expected net market benefit would be a differential change of well under $2 million in favour
of the 220kV alternative, as discussed above. However, given the contingency allowed for
establishing a substation at Brownhill Road was approximately $4 million (in terms of
expected net market benefit), such a change could not be considered significant as it is well
within the potential P90 variability of the forecasts costs.
In summary, Brownhill Road is the planned site for both the transition station, where the lines
go underground, and the nearby switchyard, that will ultimately house the 220/400kV
transformers. The issue raised in consultation was GIS for the switchyard, not for the
transition station, which is a low and unobtrusive piece of infrastructure. The NIGU
application specifies AIS for the transition station, and is silent on the type (AIS or GIS) for
the switchyard. Transpower’s NOR provides for the switchyard (when it is finally built around
2021) to be based on either AIS or GIS technologies. Transpower therefore believes it has
sufficient contingency in the proposal to allow GIS at the Brownhills site after 2020.
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Appendix D – Question 4 of 5 June Letter
Question 4. In light of new information and issues raised during the conference, please will
Transpower confirm the works covered by the proposal, and the 90% limit of project costs in
2011 dollars, which Transpower has previously stated as estimated as $824 million.
The works covered by the proposal define the scope of the proposal. Transpower’s view
remains that this is the appropriate scope of the proposal based on the best information to
hand, noting that no substantiated arguments exist to justify a move away from these
estimates. Transpower also notes that if unforeseen information comes to hand, the Rules
provide for subsequent scope changes under rule 17.2.
Transpower has engaged with stakeholders through the RMA consultation process in an
open manner and accepts that some further design refinement is likely through that statutory
process. Transpower’s expectation is that that design refinement is likely to stay within the
project scope, and that the contingency amounts for which approval is sought will be
sufficient with a high level of confidence.
However, as noted above, neither Transpower, the Commission nor New Zealand has recent
experience on obtaining consents and designations for a project of this nature and scale. It
is impossible to predict all possible outcomes, let alone their precise probabilities, and hence
despite reasonable endeavours Transpower’s “P90” figure may in reality be a “P80” or a
“P95”, or some other, figure. The Rules do not prescribe what level of accuracy any cost cap
must be, so this in no way affects the approval process, nor the process for any scope
changes including project cost changes under Rule 17.2. Transpower notes that the
Commission’s consultants (PBA consultants) estimate lower property costs than Transpower.
While Transpower does not necessarily agree with PBA’s analysis, this may increase the
Commission’s assurance.
In summary, Transpower has made reasonable endeavours to determine an amount that has
only a 10% chance of being exceeded, but the actual outcomes may differ from this.
If the RMA process takes design refinement outside the project scope, then approval to that
scope change will be required and would be sought by Transpower under Rule 17.2 as
described under Question 1 above.
Transpower requested approval in 2011 dollars at the bequest of Commission staff1. In
summary, Transpower confirms that the scope of the project and the “P90” costs for which
approval is sought remain appropriate.
Transpower has been actively managing the risks from an early stage of the project, and is
confident that the mitigation strategies and allowances that are already in place have
identified the majority of risks and have been appropriately mitigated and costed. Transpower
is confident that the amounts allowed for the easements will be adequate. Transpower has a
process for estimating the easement costs that is consistent with the Public Works Act.
One of the points brought up in the public conference was that Transpower’s easement
calculations were too low because in areas where the existing ARI-PAK line was being
replaced by the 400 kV line because Transpower were calculating the increase in injurious
affection. In these areas Transpower is deducting the injurious effect of the existing ARI PAK
1
Transpower’s position has always been that ‘now dollars’ are more appropriate. Using future dollars
introduces additional and unmanageable risk, which Transpower has endeavoured to allow for in the
contingencies for the NIGU project.
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line from the injurious effect of the new 400 kV line and the easement value in the nett
increase in injurious effect. This is consistent with the Public Works Act, with Land
Information’s Assessment of Compensation2 (“Accredited Suppliers must offset betterment
against compensation payable”), and has also been the approach taken by two independent
valuers engaged by landowners. See also Appendix J on Betterment.
Another point brought up was the 500 metre fire and burnoff restriction in the easement
agreements. This is the subject of another question raised orally by the Commission on 8
June and is addressed in Appendices K.
2
Land Information, Assessment of Compensation, Accredited Supplier Standard 2, July 2002.
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Appendix E – Question 5 of 5 June Letter
Question 5 Please advise whether Transpower accepts the Commission's recommendations
to Transpower, as set out in the Commission's Reasons for Decision document dated 23
February 2007.
Part F does not provide for the Electricity Commission to place conditions on approval of an
investment proposal by Transpower: the Commission either approves, or declines to
approve. The Commission's recommendations are therefore not part of the NIGU approval
process.
Nevertheless, Transpower takes any recommendations from the Electricity Commission, as
the regulator of critical aspects of its business, very seriously. Transpower’s responses to
the Commission's recommendations in its Reasons for Decision document are as follows.
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Appendix E1 - Recommendation (a)
Recommendation (a) The Commission expects that Transpower will use efficient project
management techniques to manage project costs and risks and, on an ongoing basis, will
review the need date for the Proposal in light of changing circumstances, keeping in mind the
need to avoid unnecessary early expenditure while ensuring that the relevant assets are
commissioned before they are needed. As part of efficient project management, the
Commission also expects that Transpower will demonstrate the need to incur costs before
committing to costs, and will publish regular reports that set out the progress of implementing
the Proposal against both expected costs and costs with contingencies, and the reason(s) for
any divergence.
Transpower has already committed to these matters as part of its application (section 2.2) or
during the Grid Upgrade and Investment Review Policy (GUIRP) process:
•
Will conduct for the Transpower Board independent periodic audits of its project
management, procurement and commercial processes to demonstrate that cost
controls are in place, with a demonstration of the process of business improvement in
response to any issues identified.
•
Will track and report project progress on its website, and send the Commission copies
of those reports. Where it is likely that costs will exceed the approved “P90” amount or
scope may need to change, Transpower will advise the Commission of this as soon as
reasonable.
•
Will report periodically to the Transpower Board on progress against both expected
costs and cost with contingencies, and reasons for any divergence (e.g. foreign
exchange), allowing for indexed escalation or deflation of linked costs.
•
Acknowledges that to manage the project risk it is essential that a high degree of
quality assurance is applied in planning, design, manufacture, commissioning, testing
and maintenance activities in accordance with good electricity industry practice.
Transpower will review the need date for the Proposal in light of changing circumstances,
including information from customers, updated SOOs and the SSF. At this stage,
Transpower is not aware of any new information that would cause it to delay the need date
but has noted the Auckland rail electrification project timetable would introduce additional
load by 2011, potentially bringing the need date forward.
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Appendix E2 - Recommendation (b)
Recommendation (b) The Commission expects Transpower to use reasonable endeavours
to obtain consent under the Resource Management Act 1991 for the Pakuranga substation to
be equipped with AIS rather than GIS. The Commission notes that it is not clear that GIS will
be required at Pakuranga, and although the Commission’s approval will cover the
construction and commissioning of a GIS switchyard, the Commission views this as
effectively a contingency. The Commission expects Transpower to diligently seek to
minimise project costs and, if the construction of an AIS switchyard results in lower overall
costs, the Commission expects Transpower to actively seek this outcome.
Transpower included costs of GIS in its proposal. However, Transpower as a requiring
authority has included AIS for the Pakuranga substation in its NOR. This is then the base
from which the RMA process works. Transpower will endeavour to achieve the most
appropriate outcome that satisfies Transpower’s statutory obligations under the RMA, while
maintaining reliability standards and good electricity industry practice, meeting the need date
and seeking to minimise project costs.
Transpower notes the residential nature of the land surrounding the Pakuranga site and the
relative scale differences between a GIS and AIS development. The relative impacts on the
site are shown in the two diagrams below:
Figure 1: Possible GIS development at Pakuranga
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Figure 2: Possible AIS development at Pakuranga
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Appendix E3 – Recommendation (c)
Recommendation (c) The Commission expects that Transpower will provide to the
Commission as soon as possible an asset capability statement regarding the intended rating
of the assets to which the Proposal relates, their electrical characteristics, and the reliability
and availability expected for the assets. The asset capability statement must be consistent
with performance assumed in applying the GIT, for example, the asset capability statement
should include the expected single circuit and double circuit forced outage rates, with an
expected repair time. The asset capability statement must also be consistent with the
proposed interconnection rules.
Transpower, as the Grid Owner, will provide asset capability information on its proposed
assets at various stages of the construction and commissioning process in accordance with
the EGRs:
Planning Stage
Transpower will submit a preliminary Asset Capability Statement (ACS) to the System
Operator at the planning stage up to and including equipment procurement or tender.
Pre-Commissioning Stage
Transpower will provide an updated ACS to the System Operator once equipment
procurement has been committed to. This will include results of compliance testing and an
assurance that critical "system" settings have been determined.
Post Commissioning Stage
During and following the commissioning programme the Asset Owner will provide a further
updated ACS. More details can be found in the Asset Capability Information Overview
document at www.transpower.co.nz3.
Contents of the Grid Owner ACS
Note that the ACS spreadsheet provided by the System Operator sets out all the asset
capability information that the Grid Owner is required to provide. A downloadable copy can
be found at www.transpower.co.nz5.
Transpower will of course also provide information as required by new rules such as the
proposed interconnection rules as they come info force.
3
http://www.transpower.co.nz/notion/share/download.asp?cid=5962&csid=22691&mdid=&file
=%2Fupload%2Fnotion%2Fsectionimages%2F22691%5F19012%5Facs%2Dinformation%2
Doverview%2Epdf
4
http://www.transpower.co.nz/notion/share/download.asp?cid=5960&csid=18999&mdid=&file
=%2Fupload%2Fnotion%2Fsectionimages%2F18999%5Fgrid%2Downer%2Dacs%2Exls
5
http://www.transpower.co.nz/notion/share/download.asp?cid=5960&csid=18999&mdid=&file
=%2Fupload%2Fnotion%2Fsectionimages%2F18999%5Fgrid%2Downer%2Dacs%2Exls
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Appendix F – Question 1 of 5 June Letter’s Appendix
With reference to drawing AFGL.400.SK14, in calculating the proposed easement widths, can
Transpower please advise what assumptions have been made for cross-arm widths for each of
the 220 kV and 400 kV cases considered?
The following crossarm widths (bottom crossarm) have been used in the calculation of the
average span easement widths as shown in drawing ADGL.400.SK14:
•
220kV, duplex Chukar 13.4m
•
220kV, triplex Sulphur 13.4m
•
400kV, duplex Rimu
•
400kV, triplex Sulphur 17.1m
17.1m
Although these are the same for each set of voltage options, they are considered to be
appropriate for the level of analysis undertaken, and are based on preliminary tower head
clearance diagrams.
These tower head clearance diagrams take account of insulator length, conductor swing,
insulator swing angles, safe climbing clearances under everyday wind, electrical clearances
under maximum wind and energised working clearances.
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Appendix G – Question 2 of 5 June Letter’s Appendix
What other parameters, including the conductor blow-out (e.g. audible noise), were
considered and which of these were key to the final proposed easement widths?
As per the submission titled "Response to Electricity Commission Questions of 13 April
2007", Transpower has checked all relevant electrical design parameters, i.e. RFI/EF/MF/AN
for their respective limits at the edge of the easement or under the conductor as relevant,
and for conductor swing.
In all cases except for the original duplex Rimu 400kV option, the key parameter for
determining the final proposed easement width is conductor swing. The change to a triplex
bundle at 400kV removes audible noise as the limiting factor. Similarly, at 220kV, none of the
electrical parameters control for easement width.
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Appendix H – Question 3 of 5 June Letter’s Appendix
In Transpower’s explanation provided on 7 May 2007- paras 26 to 30 Transpower explain that
'purchasing an additional strip of land further from the centreline is less costly, as the majority of the
“fixed cost” has already been paid". There is a substantial fixed cost component related to valuation
and negotiation costs, visual effects, and effect on the land.
However, the explanation given here is at odds with Transpower's treatment of the 220kV alternative
when a change of conductor from duplex Chukar to triplex Sulphur was investigated.
The document "NIGUP Conductor Options Easement Width Comparison" (a drawing of the conductor
easement widths) shows that the increase in easement width is from 51m to 55m, a 4m increase. The
Transpower document "FurtherInformationInResponseToECQuestions17January2007" states that the
easement width increase is 5m (para 131).
That document also shows in Table 13, that the easement cost increased from $55.4M to $63.6M.
Assuming the later information on the easement width increase is more accurate (the 4m), then the
percentage increase in easement width was 7.8%, but the percentage increase in easement cost was
14.8%.
This means the easement cost increased at nearly twice the rate of increase in width - ie more than
proportionally, directly contradicting the explanation given. Had easement costs increased at only half
the rate of increase of width (arguably more consistent with the explanation given), the easement cost
increase would have been $2.17M, not the $8.2M used by Transpower in their evaluation of the
triplexed 220kV alternative.
The Commission would appreciate receiving Transpower’s response to these points by COB 11 May
2007 to enable the Commission to prepare for the upcoming public conference.
Whilst investigating this query from the Commission with respect to property costs assumed
for the economic comparison of duplex Chukar and triplex Sulphur conductor configurations
for the 220kV option, an error in the original analysis was uncovered.
The property cost used for the 220kV option was understated by approximately $5m.
The error arose because the property cost used in the economic analysis related to an
outdated 220kV conductor configuration. Rather than the selected duplex Chukar
configuration, the reported property cost related to a duplex Zebra configuration, with
considerably shorter towers.
The originally used property costs and amended plus newly calculated costs are summarised
in the table below.
Property cost, $ million
Tower
height
Easement
width
Conductor
configuration
Variable
Fixed
Total
Originally
reported
220kV
40
50
duplex Zebra
47.4
8
55.4
55.4
220kV
48
51
duplex Chukar
52.1
8
60.1
220kV
50
55
triplex Sulphur
61.4
8
69.4
63.6
400kV
60
65
triplex Sulphur
72.6
8
80.6
80.0
400kV
61
65
triplex Sulphur
73.5
8
81.5
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The original numbers were based on rounded numbers, including tower heights and
easement widths rounded to the nearest 5m.
The recalculated numbers are based on tower heights and easement widths calculated to the
nearest 1m.
Affect of revised property costs
Amending the economic analysis to reflect the correct 220kV property cost, using the Jan 07
NPV model, results in the overall difference between the 400kV proposal and 220kV
alternative changing from approximately $11 million to $16 million, in favour of the proposal.
With respect to the comparison of duplex Chukar and triplex Sulphur in the 220kV option, the
difference between the two, using the Jan 07 NPV model, would change from approximately
$4 million, in favour of the duplex Chukar, to $5 million in favour of the duplex Chukar. This
again is in favour of the proposal.
Further detail of total Property cost
For Commission understanding the following table shows a more detailed build-up of the
property costs, illustrating how the main three parameters in calculating the compensation
cost affect the various elements of the cost.
Tower
height
Easement
width
Conductor
configuration
Easement
Corridors
of Affect
Dwelling,
Curtilage
Total
Fixed
Total
220kV
40
50
duplex Zebra
14.8
17.1
15.4
47.4
8.0
55.4
220kV
48
51
duplex Chukar
15.1
20.6
16.4
52.1
8.0
60.1
220kV
50
55
triplex Sulphur
16.3
21.4
23.6
61.4
8.0
69.4
400kV
60
65
triplex Sulphur
19.3
25.7
27.6
72.6
8.0
80.6
400kV
61
65
triplex Sulphur
19.3
26.1
28.1
73.5
8.0
81.5
The various cost elements are explained further in the document, “Public Works Act 1981,
Guide to Assessing Compensation for Compulsory Acquisition”, dated April 2004.
Transpower is prepared to release this document to the Commission for the purposes of this
analysis, under a confidentiality agreement.
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Appendix I – Question 4 of 5 June Letter’s Appendix
Submitters have raised with the Commission that that the property rights sought by Transpower are
more extensive than such rights sought by other utilities, and, therefore, Transpower has
underestimated how much it will cost to obtain these rights.
In addition, the recent decision by the Environment Court in relation to the case between Transpower
and Fernwood Dairies, has emphasised that the exclusive occupation of land by Transpower gave it
an interest in the land that was not merely an easement.
The Commission is currently seeking independent advice to:
•
investigate the issues raised in Perry Group, Manukau City Council and Dianne Allen
submissions; and
•
confirm and/or provide a revised view of easement, property costs and likely non-technical
environmental mitigation costs associated with Transpower’s Proposal
A preliminary response to question 4 was sent to the EC on Tuesday 15th of May 2007
Further to our response by Email of the 15th of May and our meeting on Friday 11th of May
2007, the following is an updated response on question 4 of the questions emailed by John
Gleadow to Tim George on Tuesday 8th of May and a copy of Transpower’s latest easement
document was supplied by Email to John Gleadow on Thursday 8th of June 2007. A more
comprehensive discussion on the subject is contained in the Appendix to this letter
In the proposed easement agreement that the parties are referring there are restrictions to
activities than can be undertaken within the easement itself, and the easement agreement
also contains a clause regarding the lighting of fires or burnoffs within 500 m of either side of
the transmission line easement. This clause was included as fires and burnoffs have been a
source of line outages in the past and managing the burnoffs reduces the risk of loss of
supply.
Our the past few years Transpower has successfully negotiated easement agreements for a
number of line upgrades including the easements for the third Islington Kikiwa circuit and the
second Blenheim Stoke circuit. The actual distance in the easement agreements has been
negotiated with individual landowners but preferred distance is 500 metres either side of the
easement
The easement agreement does not prevent the lighting of fires or burnoffs within the
easement or 500 m either side but it places a requirement on the grantor (landowner /
occupier) to get prior written consent to light fires or burnoff within the easement or within
500 metres from the grantee (Transpower), and specifically states that the consent will not
be unreasonably withheld or delayed.
Transpower’s preferred easement conditions are those lodged with LINZ on the 1st May 2007
that contained the 500 m restriction on lighting fires and burnoffs within 500 metres of the
easements to manage the risk of fires under lines causing outages. But as a result of recent
discussions with Landowners and Landowner Groups in the South Island, Transpower also
has another standard easement agreement that has the words “or within 500 metres of the
easement area” removed from the easement agreement.
With this easement agreement the fire risk will be managed by having access agreements
with adjacent landowners. The agreements will contain requests for landowners to notify
Transpower before lighting fires or initiating burnoffs within 500 metres of the easement but it
will be voluntary and not mandatory.
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The 500 metre requirement in the easement agreement was purely related to the
requirement to obtain consent from Transpower before lighting fires or burnoffs, which is a
prudent risk management exercise and Transpower does not consider that this unduly
restricts the activities either side of the easement.
All easements will be negotiated with individual landowners and Transpower will attempt to
get the 500 metre (or a lesser amount) restriction on lighting fires included in easements but
the backup position is the use of the easement terms without the 500 metre restriction
included in clause 1.1 (h).
As the inclusion of the 500 metre (or lesser amount) clause in the easement agreement will
negotiated with individual landowners, Transpower considers that there is definitely no case
to claim that there is an unreasonable restriction to activities either side of the easement, and
that the assertion by the three parties that the easement costs have been underestimated by
Transpower is not justifiable.
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Appendix J – Betterment – Increase in Injurious Effect
The procedure for the assessment of compensation claims in New Zealand is contained
within the Part V of the Public Works Act (PWA) 1981.
Section 62(1) provides for the assessment of compensation payable under the PWA for:
•
Land taken
•
Land injuriously affected; and
•
Other
Injurious affection is the term used to denote a probable loss of value due to a lawful action
by a public authority other than the acquisition of the property itself.
The provision of betterment is contained within Section 62(e) of the PWA:
“The Tribunal shall take into account by way of deduction from that part of
the total amount of compensation that would otherwise be awarded on any
claim in respect of a public work that comprises the market value of the land
taken and any injurious affection to land arising out of the taking, any
increase in the value of any land of the claimant that is injuriously affected,
or in the value of any other land in which the claimant has an interest.,
caused before the specific date or likely to be caused after that date by the
work or the prospect of the work”.
Australian and British case law supports the principal of betterment.
Similar in New Zealand, Queensland, Section 20(3), Acquisition of Land Act 1967 provides
that in assessing the compensation to be paid,
“there shall be taken into consideration , by way of off-set or abatement, any
enhancement of the value of interest of the claimant in any land adjoining
the land taken or severed there from by the carrying out of the works or
purpose for which the land is taken.”
By Section 20(4), in no case shall Section 20(3):
“operate so as to require any payment to be made by the claimant in
consideration of such enhancement of value”.
The Queensland provision restricts the enhancement provision to severance of adjoining
land and is the only statutory provision governing enhancement in Australia.
This is similar to betterment in the Public Works Act and we would expect application of the
same provisions to be applied in New Zealand legislation.
Betterment relates to the improvement, or enhancement, in the value of real property. For
transmission lines, betterment may occur where the activity decreases the negative impact of
the transmission lines to the value of the property.
Any claim for injurious affection must take into account, by way of deduction from the total
amount of compensation that would otherwise be awarded, any increase in the value of the
land of the claimant that is injuriously affected or in the value of any land in which the
claimant has an interest caused by the work or the prospect of the work. This is commonly
referred to as “betterment”. Betterment applies whether the increase in value occurs before
the specified date or is likely to occur after the work commences.
An example of betterment in the context of the work proposed by Transpower is the removal
of the ARI-PAK A line which may be replaced by a new 400kV line or not replaced at all. The
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removal of the existing line from a property has the potential to increase the value of the land
and any increase in value will be offset or abated from the compensation sum assessed.
This means that in assessing compensation betterment will be deducted from any increase in
value of land caused by the public work. It is also applied that betterment cannot be charged
where there is no compensation payable or where the compensation payable is less than the
betterment occurring to the land.
Transpower having read the submissions relating to this matter, maintain that we have
assessed compensation and the issue of betterment in accordance with the provision of the
PWA.
Transpower has been in discussions with a number of landowners concerning the quantum
of compensation that is payable for the proposed works. We have received a number of
valuations prepared by independent registered valuers on behalf of landowners and those
independent landowner valuations have addressed the betterment offset of the ARI-PAK line.
It should be noted that in a number of cases they have applied the same methodology as
outlined above and, in our opinion, have correctly interpreted the relevant provisions of the
PWA.
Useful summaries of these issues are available on the LINZ website.
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Appendix K – Transpower Easement Conditions
Historical Easement Conditions
Our the past few years Transpower has successfully negotiated easement agreements for a
number of line upgrades including the easements for the 3rd Islington Kikiwa circuit and the
2nd Blenheim Stoke circuit.
In the easement agreement there are restrictions to activities than can be undertaken within
the easement itself, and the easement agreement does contain a clause regarding the
lighting of fires or burnoffs within either side of the transmission line easement. This clause
was included as fires and burnoffs have been a source of line outages in the past and
managing the burnoffs reduces the risk of loss of supply. The actual distance in the
easement agreements has been negotiated with individual landowners but preferred distance
is 500 M either side of the easement
The clause in the easement agreement on fires and burnoffs within 500 m was originally
inserted after discussions with the NZ forest owners association, and was intended to reduce
the risk of line outages due to burnoffs near the line. The clause is there to ensure that if
there were planned burnoffs within 500 m of the either side of the line then the owners /
occupiers would get consent from Transpower before the burnoffs took place. Transpower
could then evaluate the risk to the power system and if the was deemed to be too high then
Transpower would negotiate a more suitable time with the landowner / occupier or arrange
for alternative methods of clearing vegetation.
The easement agreement does not prevent the lighting of fires or burnoffs within the
easement or 500 m either side but it places a requirement on the grantor (landowner /
occupier) to get prior written consent to light fires or burnoff within the easement or within
500 metres from the grantee (Transpower), and specifically states that the consent will not
be unreasonably withheld or delayed.
Transpower did intend to use the same easement terms going forward, and as such these
easement terms (with the 500m fire restriction clauses) were sent to Land Information New
Zealand (LINZ) for approval as a memorandum under section 155A of the Land Transfer Act
1952 on 1 May 2007. The easement terms were approved on 3 May 2007 by Warren Moyes
as Acting Registrar-General of Land and then registered in the Land Registry Office.
Registration was complete on 7 May 2007.
The easement terms have also been reviewed by Crown Property Clearances at Land
Information New Zealand and no concerns were raised regarding this provision.
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2 GRANTOR’S OBLIGATIONS
2.1
The Grantor will not, without the prior written consent of the Grantee (which will not be unreasonably
withheld or delayed), do or allow the following to be done:
(a)
alter or disturb the present grades and contours of the surface of the Easement Area except in the
course of normal farming and grazing operations (but subject to the restrictions set out in this
Easement Instrument) or otherwise with the prior written consent of the Grantee on each
occasion;
(b)
(c)
erect any building or other structure (including fences) on the Easement Area;
plant any vegetation on the Easement Area that will or may when fully grown exceed 2.5 metres in
height or breach any legal requirement applying from time to time regarding vegetation near
electricity lines;
(d)
operate any Equipment or Vehicles on the Easement Area within a minimum clearance distance
of 6 metres from any electricity transmission line conductor;
(e)
excavate or deposit material on the Easement Area;
(f)
impede the Grantee’s access over the Easement Area and any agreed access routes over the
Land or damage the surface of the agreed access routes;
(g)
knowingly cause or permit flooding of the Easement Area;
(h)
light any fires or burn off vegetation within the Easement Area; or within 500 metres of the
Easement Area:
(i)
carry out a “subdivision of land” (as defined in section 218 of the Resource Management Act
1991) of the Land; or
(j)
do any other thing on the Land which may cause damage to the Works or endanger the continuity
or safety of the supply and distribution of electricity.
Revised Easement Conditions
Transpower’s preferred easement conditions are those lodged with LINZ on the 1st May
2007 that contained the 500 m restriction on lighting fires and burnoffs within 500 metres of
the easements to manage the risk of fires under lines causing outages. But as a result of
recent discussions with Landowners and Landowner Groups in the South Island, Transpower
also has another standard easement agreement that has the words “or within 500 metres of
the easement area” removed from the easement agreement.
With this easement agreement the fire risk will be managed by having access agreements
with adjacent landowners. The agreements will contain requests for landowners to notify
Transpower before lighting fires or initiating burnoffs within 500 metres of the easement but it
will be voluntary and not mandatory.
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The grantors obligations in the easement agreement lodged on 21st may 2007 now read:
2 GRANTOR’S OBLIGATIONS
2.1
The Grantor will not, without the prior written consent of the Grantee (which will not be unreasonably
withheld or delayed), do or allow the following to be done:
(k)
alter or disturb the present grades and contours of the surface of the Easement Area except in the
course of normal farming and grazing operations (but subject to the restrictions set out in this
Easement Instrument) or otherwise with the prior written consent of the Grantee on each
occasion;
(l)
erect any building or other structure (including fences) on the Easement Area;
(m)
plant any vegetation on the Easement Area that will or may when fully grown exceed 2.5 metres in
height or breach any legal requirement applying from time to time regarding vegetation near
electricity lines;
(n)
operate any Equipment or Vehicles on the Easement Area within a minimum clearance distance
of 6 metres from any electricity transmission line conductor;
(o)
(p)
excavate or deposit material on the Easement Area;
impede the Grantee’s access over the Easement Area and any agreed access routes over the
Land or damage the surface of the agreed access routes;
(q)
knowingly cause or permit flooding of the Easement Area;
(r)
light any fires or burn off vegetation within the Easement Area;
(s)
carry out a “subdivision of land” (as defined in section 218 of the Resource Management Act
1991) of the Land; or
(t)
do any other thing on the Land which may cause damage to the Works or endanger the continuity
or safety of the supply and distribution of electricity.
The 500 metre requirement in the easement agreement was purely related to the
requirement to obtain consent from Transpower before lighting fires or burnoffs, which is a
prudent risk management exercise and Transpower does not consider that this unduly
restricts the activities either side of the easement.
All easements will be negotiated with individual landowners and Transpower will attempt to
get the 500 metre (or a lesser amount) restriction on lighting fires included in easements but
the backup position is the use of the easement terms without the 500 metre restriction
included in clause 1.1 (h).
As the inclusion of the 500 metre (or lesser amount) clause in the easement agreement will
negotiated with individual landowners, Transpower considers that there is definitely no case
to claim that there is an unreasonable restriction to activities either side of the easement, and
that the assertion by the three parties that the easement costs have been underestimated by
Transpower is not justifiable.
070606-EC-NIGU-FinalQuestionsD4.doc