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Two listed lines companies make the grade

By Phil Boeyen, ShareChat Business News Editor

Wednesday 31st January 2001

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Two of the country's listed electricity lines companies have made it into the top five spots in a new performance survey.

The survey by management consulting firm Cap Gemini Ernst & Young measures a number of performance factors including profitability, operating costs, pricing, network efficiency and reliability.

The top ranking in the report went to Electricity Invercargill, second was Tasman Energy and third was Alpine Energy.

Listed lines companies Horizon Energy (NZSE: HED) and UnitedNetworks (NZSE: UNL) were fourth and fifth respectively.

Two companies dropped off the top 10 during 2000 - Network Waitaki and Powerco (NZSE: PWC). The report says the latter was attributable to its acquisition of Wairarapa Electricity which is a low customer density network with high costs

Overall the report claims New Zealand's light-handed regulation of the electricity distribution companies is beginning to work effectively, with line charges reducing by 5% in real terms over the previous year.

Author of the report, Dr Govind Saha, says that further reductions are expected as the lines companies continue to introduce efficiencies.

"Not only that, nearly all of the companies have promised to freeze their prices until August 2001, which provides a further guarantee of price reductions in real terms."

Dr Saha says the results are in line with the 1999 report, which indicated that there was the potential for an average 10% drop - about $70 million - in distribution line charges across New Zealand.

"The electricity distribution companies have made significant advances during the past year.

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

"The slow rate of industry consolidation, which has seen the number of lines companies reduce by only three to 30, is probably the largest obstacle to progress and has not been helped by the continued lack of regulatory certainty."

Other findings in the 2000 analysis shows sector costs decreased during the year, continuing the trend of recent years, while system reliability continued to improve across all three measures.

"One crucial measure of performance for network companies is their ability to deliver uninterrupted electricity to the consumer," Dr Saha says.

"It is encouraging that 2000 saw significant improvement in reliability, with all industry measures now at their best recorded levels."

"It is important that system security and service quality are not compromised, and New Zealand does not suffer from the problems currently experienced in California, where the electricity market design has not encouraged the industry to build new generation."

Overall, the value of the lines companies in New Zealand is $4.57 billion - 5.5% or $240 million more than the previous year.

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