5. Evaluation of the proposed national environmental standards: costs and benefits

5.1  Preliminary assessment

Most of the costs can be estimated with a reasonable degree of certainty, but many of the benefits cannot be quantified. For example, there is a potential for the NES to prevent loss of life arising from a grid outage or unsafe activities carried out by third parties. Grid outages can also have economic effects. However, it is not possible to estimate the future frequency and magnitude of grid outages nor the likelihood of loss of life.

Where there is a great deal of uncertainty around estimates of the benefits, they have not been included in the quantitative analysis. Appendix 2 contains an analysis of the sensitivity of the results to changes in key assumptions about the likely costs and benefits.

For the purpose of the analysis, it is assumed that investment in transmission maintenance and upgrading activities would increase over a 10-year period to three times the average level of expenditure over the previous decade. The costs and benefits of the proposals have been evaluated as estimated increases or decreases compared with the costs of the current regulatory regime, taking into account:

• predicted future increases in transmission activities
• the extent to which current plans already include provisions and requirements equivalent to those in the proposed NES.

A further analysis will be undertaken after consultation, when proposals for regulations (standards) are presented to the Minister for the Environment and ultimately to Cabinet for approval. Section 32 of the RMA requires that an analysis be undertaken of the appropriateness of the objectives in meeting the purposes of the RMA, and the costs and benefits of the proposals.

5.2  Effects on the public and the environment

Transmission activities NES

An improvement in the ability of the line operator to carry out regular maintenance and upgrading will provide the public with indirect benefits resulting from greater security of electricity supply due to fewer outages. Grid constraints or delays in upgrading could result in loss of supply, with corresponding economic costs to the public and businesses. For example, the estimated cost of a grid outage in Auckland in 2006 is $70 million (see section 2.2).

The public will also benefit from avoiding future electricity price increases as a result from grid constraints. The NES is likely to reduce the overall costs of managing transmission; while this is a significant amount nationally, it is unlikely to result in any noticeable reduction in individual consumer electricity charges.

Environmental benefits arise from improving the management of the effects of electricity transmission and enhancing the ability to connect renewable electricity generation to the grid.

Local authority implementation costs arising from the NES (which will ultimately be passed on to the public as ratepayers), are discussed in section 5.3. Costs and benefits specific to landowners adjacent to transmission lines are discussed in section 5.4.

Transmission risks NES

The transmission risks NES will promote greater security of electricity supply (ie, fewer outages resulting from third-party activities, and greater protection of transmission lines from the associated risks). The public will receive benefits similar to those described above. Interruptions to electricity supply can affect people’s wellbeing, health and ability to operate their businesses, and could result in loss of life. There is too much uncertainty in estimates of the frequency and magnitude of these effects to include them in the quantitative analysis.

5.3  Costs and benefits to local authorities and ratepayers

Transmission activities NES

The greater certainty of an NES means that councils will no longer face submissions and appeals from Transpower on plan changes arguing for rules relating to transmission activities. Information on the cost savings to councils in not needing to respond to plan submissions from Transpower was not available at the time this analysis was done. The certainty of consent types and matters to be considered should reduce costs to councils in determining the consent requirements for a transmission project, speed up the consent process and reduce delays. These costs vary widely between transmission projects, and it was not possible to derive a meaningful average cost saving.

Councils will need to become familiar with the NES and implement it. The estimated cost is $60,000 total for all councils in the first three years.

Because of the current variability in plans, the proposed NES will result in some local authorities receiving more consent applications for transmission activities, and some local authorities receiving fewer applications. Overall, it is estimated that councils will receive fewer applications for existing-use certificates. Councils are likely to process more certificates of compliance, but these should be easier to assess against the standard than against plans. Direct costs of processing applications will be passed on to Transpower (and are discussed in section 5.5). However, there may be non-recoverable costs to councils (and ultimately ratepayers) through an increase in the number of applications for certificates of compliance. This non-recoverable cost is estimated at around $14,600 per annum across all councils for the first year, and rising to $33,750 in year 10.

Some local authorities may choose to initiate plan changes to ensure their plan rules are fully consistent with the NES to avoid confusion, although there is no legal requirement to do so. Other local authorities may update electronic versions of plans and web pages to note where the transmission NES applies. The analysis of costs and benefits assumes that 10 councils will choose to change their plans in the first two years, at a cost of $50,000 each, and the remaining councils will make minor changes (totalling $20,000 across all councils over two years).

Transmission risks NES

As for the transmission activities NES, local authorities will benefit by receiving fewer submissions on plan changes from Transpower but insufficient information is available to quantify this benefit. However, the proposed transmission risks NES will result in additional costs to local authorities, principally district councils and some regional councils, from implementation costs - estimated at $60,000 across all councils in the first year.

The responsibility for enforcing provisions for buildings and earthworks will be transferred from NZECP 34, and costs that are not fully recoverable will be borne by councils (and ultimately by ratepayers). The analysis assumes that general enforcement and monitoring for either option A or option B will cost councils $25,000 per year nationally, and six prosecutions will be required within the first three years at a cost to councils of $50,000 each, and one prosecution per year in subsequent years.

Councils will need to process additional resource consent applications relating to third-party activities adjacent to transmission lines. The majority of these costs will be recovered from consent applicants, but councils will bear a small unrecoverable proportion of this cost, estimated at around $8,400 per year for option A and around $20,000 per year for option B across all councils.

As for the transmission activities NES, some councils will choose to change their plans to align them with the NES - the estimated cost of $510,000 in the first two years applies whether the plan changes arise as a result of one NES or two.

5.4  Costs and benefits to landowners

Transmission activities NES

Landowners may benefit from certainty about the activities that Transpower can undertake without requiring resource consent, and the activities that require consent and for which the landowner may be regarded as an affected party. In some cases landowners will have more opportunity to comment on consent applications by Transpower, and in other areas the opportunities may reduce. The analysis assumes that overall there are no quantifiable costs or benefits to landowners.

Transmission risks NES

The proposed NES will provide certainty about which activities adjacent to transmission lines can and cannot be carried out, and which will need resource consent.

Some landowners will face an increase in costs from the requirement to obtain resource consent for some activities that may be permitted in plans at present. This may be the case for earthworks and buildings. Total consent costs arising from the NES are estimated to be around $26,000 per year for earthworks permits, around $58,000 per year for buildings under option A, and around $180,000 per year for buildings under option B. Subdivisions already require consent, so additional costs are unlikely. If option B (a 20-metre consent trigger zone) is implemented for buildings, then in some cases land adjacent to and under transmission lines may no longer be suitable for the construction of new buildings.

5.5  Costs and benefits to Transpower

Transmission activities NES

The biggest cost saving of the transmission activities NES to Transpower will arise from the national consistency of requirements. Transpower currently monitors district plans, makes submissions to district plans on suitable provisions for transmission activities, and appeals plan changes. It is estimated this cost will reduce by $163,000 per year because it should not be necessary for Transpower to make submissions on plan rules related to transmission, given that under the NES councils can legally only implement rules that are identical to the standards. The only exception is if a council chooses to restate that a permitted activity is permitted but subject to controls on effects not covered in the NES (eg, specifying the colour pylons must be painted).

Although the NES may result in Transpower needing more consents for some activities in some areas, it should result in Transpower requiring fewer consents in other areas. For the purposes of this analysis, it has been assumed that Transpower costs per consent will reduce, and the total cost of obtaining resource consents per year will reduce by $37,500 in the first year, rising to over $112,000 in year 10.

Transpower may not need to apply for as many certificates for verifying that activities are existing uses as under the current regime; for example, these activities may now be permitted. Transpower is likely to apply for more certificates of compliance, but at a lower cost since it should be easier to verify that an activity complies with the NES. For a line enhancement traversing several districts, it may not be necessary to apply for certificates of compliance in all of the districts involved. There will be one NES rather than several plans to assess, so the costs of preparing applications may be lower. Overall, the estimated cost saving in RMA approvals is around $176,000 in the first year, rising to around $529,000 after 10 years.

Another cost associated with the variability in district plans is the cost of becoming familiar with transmission proposals and assessing consent requirements. This is a cost to Transpower in terms of arranging site visits and providing additional information to councils. It can also be a protracted process and cause delays in projects (with associated increases in operational costs). These costs vary widely, so it has not been possible to quantify them.

Transmission risks NES

The largest benefit to Transpower is a reduction in the cost of rectifying breaches of NZECP 34, ranging from correcting earthworks violations to raising transmission lines in order to correct under-building violations. Transpower spends over $5 million per year rectifying violations. Under the NES the number of violations, and hence the rectification costs, should reduce. Infringements will be subject to the full range of RMA enforcement provisions, from infringement notices to prosecution. The RMA also provides for the ability to have breaches rectified.

Note that the NES cannot be used for correcting violations before it came into force, which must be resolved under the Electricity Act. Nor can an NES act retrospectively: if an existing activity was legal under NZECP 34, it will have existing-use rights under the RMA. The analysis only assesses likely future encroachments, and assumes the rectification costs, in the absence of a NES, would be the same as in previous years.

Under option A (based on electrical safe distances), rectification costs are predicted to reduce by $442,500 per year. Under option B (a 20-metre-wide strip each side of the transmission lines in which consent will be required for building) there will be additional benefits in those local authorities that do not already have this provision in their plans for subdivision or building. The estimated cost saving is $937,750 per year.

Both option A and option B reduce the likelihood of outages due to activities being too close to the transmission lines, such as construction activities (tall mobile equipment) and activities associated with buildings (TV aerials and extensions to buildings). Option B also removes the problem of under-building and activities too close to the transmission line. Better building siting also reduces operational difficulties, such as access for maintenance and emergency repair, thus reducing the risk of outage.

Transpower will not need to make submissions on plan rules on the matters covered by the NES because these cannot be more lenient than the NES. However, Transpower will still make submissions on third-party activities not covered by the NES. For option A the costs are predicted to reduce by 5% and under option B by 25%.

Under the transmission risks NES, Transpower may have more opportunity for involvement in consent application, and this will result in a small increase in costs, particularly for option B.

5.6  Costs and benefits to government

Transmission activities NES

The government will face implementation costs, which will include liaising with councils, producing guidance material on the standards, and monitoring the implementation and effectiveness of the standards. It is assumed that this will cost $200,000, spread over three years.

The government benefits through an NES that supports its energy policies, as expressed in the draft New Zealand Energy Strategy, and that supports the purposes of the RMA.

Transmission risks NES

The government will face implementation costs as for the transmission activities NES. The cost of implementation will be the same for one NES as for two.

Table 3: Estimated costs and benefits of implementing national environmental standards

5.7  Conclusions

Benefits derive from the certainty provided by having a consistent national framework for managing the effects of transmission activities, and for managing the effects of activities carried out adjacent to transmission lines. Fewer existing-use certificates will be required for transmission activities under the proposed NES, with a corresponding increase in applications for certificates of compliance. Applications for resource consents and certificates of compliances should cost less to prepare, providing significant benefits to Transpower. Councils will face some implementation costs through needing to become familiar with the new requirements, and some will choose to change their plans to accommodate any NES.

The proposed NES for transmission risks will result in a significant reduction in Transpower’s expenditure rectifying problems caused by third-party activities that damage the lines or put them at risk. As a result of the implementation of the proposed NES, some of the costs of managing third-party activities will increase, due to increased numbers of resource consent applications and increased enforcement costs. Additional costs could fall on local authorities through increased consent processing, monitoring and enforcement (including prosecutions). Some of these costs would be passed on to landowners as consent fees, and the remainder borne by ratepayers. Landowners may face additional costs in preparing resource consent applications.

There are benefits from both proposed standards arising from the national consistency of requirements, meaning that Transpower will no longer need to make submissions on district plans on the matters covered by the NES. The government will incur implementation costs from providing guidance material and monitoring the implementation of the standards.

This analysis of the costs and benefits of the proposals shows that an NES for transmission activities in combination with an NES to control risks to transmission, based on electrical safe distances, has a net benefit (over a 10-year period) of $3.8 million and a benefit-to-cost ratio of 2.9 to 1. The costs and the benefits of option B are correspondingly higher than option A, and overall option B has a higher net benefit but similar ratio of benefits to costs. A transmission activities NES in combination with a transmission risks NES which provides a 20-metre ‘consent required zone’ for buildings each side of the transmission lines has a net benefit of $5.9 million and a ratio of benefits to costs of 2.9 to 1. This is summarised in table 4.

Table 4: Preliminary summary of benefits of the proposed national environmental standards