Push back against Powerco price hike plan

Author
Paul McBeth - Scoop,
Section
Business,
Publish Date
Tuesday, 3 October 2017, 3:44PM
 Powerco Akura Substation, Masterton. (Photo / NZ Herald)
Powerco Akura Substation, Masterton. (Photo / NZ Herald)

Big electricity users and generator-retailers are wary that customers will bear an unfair burden from lines company Powerco's plan to fund a $1.4 billion network upgrade through a hike in regulated prices.

The New Plymouth-based company, which is owned by fund managers QIC and AMP Capital, is seeking a 'customised price-quality path'.

That would let it increase weekly prices by $1-to-$1.50 per household, lifting annual revenue by 5.7 per cent in the first year followed by four years where increases are linked to inflation.

It says it needs the funds to help pay for $873 million of capital spending and $455m of operating expenditure through the period.

The Commerce Commission regulates prices for gas and electricity transmission companies such as Powerco, typically using a default price-quality path.

Firms can seek to customise their own price path for those unexpected needs, the first being Christchurch lines company Orion's application to lift prices to help fund rebuilding its network after the 2010/11 earthquakes.

Powerco's application is the first without the pressure of an external event forcing its hand and several submitters note the proposal will set an important precedent for future companies.

The Electricity Retailers' Association of New Zealand, which represents 20 power companies, said because of that precedent it was keen to make sure the regulator's scrutiny was robust.

The lobby group said the application lacked analysis of the consumer benefit from Powerco lifting investment against what is currently being spent.

It claimed the lines company hadn't "sufficiently demonstrated that the additional levels of investment will result in the security levels required" or "sufficiently demonstrated that the benefit to consumers justifies the additional costs."

Similarly, the Major Electricity Users' Group was also unconvinced customers will be better off under the customised model, or that the lines company's owners had "made sacrifices in order to meet necessary expenditure".

The regulator will release a draft decision in November.

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