The bill arrives on schedule
Transpower’s Cook Strait HVDC cables were laid in 1991 with a 40-year design life. Underwater surveys confirm they are deteriorating exactly as expected. None of this is a surprise. What should concentrate the minds of business owners is the price tag and the queue of costs behind it.
The state-owned grid operator has submitted a $1.1 billion major capex proposal for Stage 1 of the replacement programme, covering three new submarine cables, a fourth cable for added capacity and redundancy, new termination stations on both sides of the strait, and a filter bank upgrade at Benmore. The forecast build cost is $978 million, with a total allowance of $1,138.6 million once contingencies are included. The Commerce Commission plans to approve it, and a separate application for control system work will follow in 2026. The full programme was originally estimated at up to $1.4 billion.
The 610-kilometre link carries up to 15% of New Zealand’s total electricity use between the islands. It connects South Island hydro to North Island demand. Nobody disputes it needs replacing. The question is what happens to the bill.
$6 billion in network costs already approved
Transpower will recover the cable investment through transmission charges spread over 40 years, beginning in the early 2030s. Transmission currently accounts for roughly 8% of consumers’ electricity bills. That share is heading up.
But the HVDC project is just one line item. The Commerce Commission has already permitted Transpower and local lines companies to raise prices by nearly $6 billion for broader network upgrades. That translates to $10 to $25 per month on average power bills from April, rising to $30 to $85 per month over four years once generation investment costs flow through.
Electricity prices rose 12% in 2025 and are projected to climb at least 5% in 2026. Lines charges, which cover both transmission and local distribution, represent roughly one-third of the average power bill. They are fixed costs. Switching retailer does nothing to avoid them.
The industry talks about competition while costs go one way
Transpower CEO James Kilty frames the cable project as a competitive enabler: “Moving ahead means Kiwis can continue accessing the lowest-cost electricity generated across both islands, supporting competition among generators and keeping downward pressure on power prices as the economy electrifies.”
Energy Resources Aotearoa CEO John Carnegie called it responsible stewardship, praising Transpower for “doing what it does best, planning early”.
The language is carefully chosen. The HVDC link does keep downward pressure on wholesale generation dispatch costs by connecting cheap South Island hydro to North Island load. But wholesale prices are only one component. The total delivered cost of electricity to a business customer includes network charges that are structurally rising, and no amount of generator competition fixes that.
Major Electricity Users Group executive director Karen Boyes is more direct: “Domestic, commercial and industrial users need a power generation system fit for purpose delivering long-term savings at internationally competitive rates.” That is a polite way of saying New Zealand’s electricity cost trajectory is a competitiveness problem.
The capital queue keeps growing
Behind the HVDC project sits a government-backed plan for a liquefied natural gas terminal costing at least $1 billion to provide backup generation as domestic gas production declines. Energy Minister Simon Watts argues it could save around $265 million annually by reducing price spikes. Perhaps. But the terminal itself is another capital cost that will be socialised across electricity users.
Add it up: $1.14 billion for the Cook Strait cables, nearly $6 billion in approved network upgrades, at least $1 billion for an LNG terminal, and the full cost of new renewable generation investment still to come. This is not an electricity system getting cheaper. It is a system doing expensive catch-up after decades of underinvestment, with every dollar recovered through regulated charges on the businesses and households that use the power.
What this means for anyone running a business
Boyes noted that 90% of consumers who shop around can save about $400 a year by switching plans. That is useful advice for households. It is largely irrelevant for manufacturers, food processors, cold storage operators, data centres, and large commercial premises where network charges are a significant and growing share of the electricity bill.
For those businesses, the cost trajectory is locked in by regulatory decisions already made. Budget accordingly, and stop waiting for politicians to deliver the cheap power they keep promising.
Sources
- BusinessDesk: Commerce Commission plans to approve Transpower’s $1.13b Cook Strait cable (2025)
- NZ Herald: Transpower to spend $1.1b on Cook Strait link upgrade (2025)
- Newstalk ZB: Transpower proposes $1.4 billion replacement for ageing Cook Strait electricity cables (2025)
- Scoop: Transpower moves ahead with $1.1 billion proposal for first stage of Cook Strait cable investment (2025-09-09)
- Transpower: HVDC link upgrade programme (2025)
- Transpower: HVDC link upgrade programme – Major capex proposal (2025)
- Transpower: Moves ahead with $1.1 billion proposal (2025)
- RNZ: Consumers to foot the bill for rising cost of electricity network upgrades (2025)
- The Spinoff: Big costs, big profits – the state of the electricity sector in 2026 (2026-02-24)
- NZCity: Transpower’s preparing for the future (2025)
- BusinessDesk: Transpower proposes $1.4b replacement for ageing Cook Strait electricity cables (2025)