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Heat goes on power retailers

By Nick Stride

Friday 4th April 2003

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There were audible sighs of relief this week as the Commerce Commission backed away from a price-control regime that electricity lines companies said would end up costing consumers.

The commission has abandoned the threatened "CPI-X" regime in favour of a "thresholds" approach that will identify lines companies whose charges need further investigation.

Powerco chief executive Steven Bolton said lines business pricing was a complex matter and the commission needed more time and industry discussions to get its regime right.

Powerco's share price took a hit after the commission publicised a draft determination late last year saying it would use its Commerce Act powers to impose price control to curb alleged "profiteering" by monopoly lines companies.

Powerco told The National Business Review two weeks ago it would have to charge new industrial and commercial customers for access to its network and upgrades if its prices were controlled.

The commission's about-face acknowledged allegations from lines companies that it was power retailers, not lines companies, that were profiteering from charges to consumers.

Lines companies claim retailers aren't passing on reductions in lines charges.

Commission chairman John Belgrave has passed on those allegations to the ministers of commerce, energy, and consumer affairs. Mr Belgrave noted a government policy statement last year articulated an "expectation" from the government that the industry would provide customers with bills that would allow them to identify the energy and lines components.

The commission will use a "price path threshold" requiring no average increase in lines charges since August 2001 and real price reduction from April 2004. A "quality" threshold requires no material deterioration in system reliability.

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