Impact on electricity bills would be 'significant'

In its draft decision on how much Aurora can bump up prices to pay to fix its dilapidated network, the Commerce Commission says customers can expect bills to increase by between $240 and $876 a year in the next five years.

Aurora sent a proposal to the regulator in June asking to be able to increase what it charged customers in order to spend $383 million over three years, or $609 million over five years to replace its failing infrastructure.

The commission says it was able to slash $86 million from that proposal, which would give Aurora $523 million over five years to work on its network.

The cutbacks from Aurora’s proposal were in capital spending on new assets ($41 million) and operational expenditure ($45 million).

Those reductions were based on reduced demand because of Covid-19 and work on the network the commission believed Aurora could do more efficiently to save money.

Associate Commissioner John Crawford said in its application to the commission Aurora said prices could rise by up to $30 a month by 2024, but it had not included factors like GST and inflation.

He said the commission preferred to include those factors and extend the proposal to five years to better reflect what customers were going to have to pay.

“While our draft decision would lower Aurora’s expenditure and substantially reduce the increase in lines charges compared to its plan, we expect the impact on electricity bills would still be significant,” Mr Crawford said.

“To help mitigate the bill shock, we have proposed to smooth Aurora’s revenue over the five-year CPP period. This would limit Aurora to increasing the maximum revenue it can collect from its customers by no more than 10% a year.’’

The draft decision said the average price increase for Central Otago and Wanaka by 2026 was the highest of the three areas at $612 a year.

In Dunedin that average increase in five years was likely to be $384, whereas in Queenstown it was $396 a year.

Mr Crawford said how the prices were set out for different areas was up to Aurora, but the Electricity Authority was likely to oversee that decision.

The commission has had staff in Dunedin, Central Otago and Queenstown listening to concerns from customers about the looming price rise.

Mr Crawford said it was clear in many areas - particularly in Queenstown and Central Otago - there was a lack of trust in the lines company.

“One of the major themes from our discussions with Aurora’s customers was their lack of trust and confidence in Aurora’s ability to deliver what it says it will.

‘’We consider Aurora has taken some steps to ensure it is capable of implementing its work programme, so we have instead focused our attention on ensuring Aurora can be held to account for delivering on its plan,” Mr Crawford said.

He said the commission wants to lower Aurora’s quality standards for unplanned outages to align with where the state of the network is at.

‘’This would not be set at the levels Aurora requested but would allow it to meet targets that reflect its performance over the past five years,’’ the commission wrote in a statement.

‘’Overall, this should see the reliability of supply stabilise at current levels before gradually improving over time.’’

The commission also proposed that Aurora should have to publish an ‘’Annual Delivery Report,’’ where it details exactly what work it has down in each region and presents that in public meetings.

‘’We are also proposing that Aurora reports more clearly on service quality, such as voltage issues, and how it calculates its regional prices,’’ Mr Crawford said.

While Aurora had been able to keep prices low for customers over the years, the network was now at a point where the network was increasingly dangerous and less reliable, Mr Crawford said.

“We understand the disappointment and anger Aurora’s customers hold about the position the business is in.

‘’Aurora has nevertheless made its case for urgent and ongoing investment to replace old and failing assets in its network.

‘’Without it, the network will continue to deteriorate, safety incidents will increase, and its customers will experience more frequent, and longer, outages.’’

jacob.mcsweeny@odt.co.nz