Regulator gives provisional thumbs up to Powerco price hike for $1.27 bln upgrade

Thursday 16th November 2017

The Commerce Commission has given the early all-clear for lines company Powerco to raise prices to fund a $1.27 billion upgrade of its network over the next five years.

The regulator's draft ruling today would let the New Plymouth-based company increase prices to recover the cost of reinvesting in its network, which is coming under growing pressure at a time when parts of it are nearing the end of their life. If the decision is upheld in its final review, the average residential monthly electricity bill will rise by about $2.70 in the next five years, and another $6 beyond that on current demand and investment forecasts, the commission said.

“We are conscious of keeping electricity affordable. However, long-lived assets like electricity networks require significant upfront investment, with the full costs recovered over their expected lifetime," commissioner Stephen Gale said in a statement. “We are satisfied that the proposed investment is necessary to maintain a safe, secure and resilient network while being mindful of emerging technologies like solar panels and battery storage.”

The 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 New Zealand's application to lift prices to help fund rebuilding its network after the 2010/11 earthquakes.

The draft ruling proposes Powerco report annually to the commission and at public meetings on how the project is tracking against its plan.

Major electricity users and power retailers were wary of the proposal in submissions to the regulator, saying the lines company hadn't demonstrated the benefit to consumers justified the additional cost.

Submissions on the draft ruling are open until Dec. 15, with a final decision expected in late March. The new prices would apply from April 1.

(BusinessDesk)

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