Too many power companies says consultant

Friday 2nd February 2001

New Zealand's host of small power lines companies will begin to disappear now the industry has some regulatory certainty, according to Cap Gemini Ernst & Young (CGEY).

In its latest analysis of the sector CGEY says 29 lines companies is too high a figure for the size of the country.

Even those smaller companies that rate highly on efficiency would be more efficient still if they were larger.

A case in point was Electricity Invercargill, which ranks first in CGEY's performance analysis. It has 16,733 customers.

CGEY utilities consulting sector vice-president Govind Saha said it could find further efficiencies if it were three or four times larger.

Network charges last year fell 5% in real terms, Dr Saha said. Further falls were expected as the new information-disclosure regime encouraged companies to become more efficient.

Nearly all the firms had promised to freeze prices until August this year.

System reliability had improved across the sector and sector costs fell, in line with the trend of recent years, Dr Saha said.

The second, third and fourth rankings companies were also minnows - Network Tasman, Alpine Energy and Horizon Energy Distribution.

Among the big networks, United Networks (480,000 customers) came fifth and Orion (162,000) seventh. Vector (260,000) didn't make the top 10.

The government is considering industry regulation in the light of last year's Caygill report.

CGEY proposes a low-cost regulatory scheme based on a penalty-point system, rather than a "heavy-handed, high-cost system."

"The primary concern with the current system is the speed at which efficiencies are being delivered," Dr Saha said.

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