Otago residents and businesses against significant power price hikes to pay for Aurora Energy's massive reinvestment programme will be able to push for spending to be deferred to soften the blow.
The Commerce Commission today released an issues paper as it asked for feedback from customers on Aurora Energy's application to increase lines charges to fund $383 million in investment over the next three years.
The Commission said Aurora, which supplies electricity to Dunedin, Central Otago and Queenstown Lakes, has historically under-invested in its network and in recent years this has resulted in an increasing number of safety incidents and unplanned power cuts.
To pay for the $383m investment to bring its network up to scratch, Aurora is proposing price increases to residential power bills of approximately $20-30 a month over the three-year investment period depending on where a consumer lives.
If the Commission approves a five-year investment programme, this would result in further increases in years four and five of approximately $5-6 a month.
Associate Commissioner John Crawford said the Commission has identified a number of key issues it wants consumer and stakeholder feedback on including options for minimising consumer price shocks.
"We are considering if spending could be deferred, reduced or recovered over a longer period to soften price shocks. However, in making these decisions we also have to consider Aurora’s financial stability and its ability to complete necessary work to fix its network,” Mr Crawford said
"We want to hear consumer preferences for price increases.
"For example, would they prefer prices to increase in gradual and steady increments or price increases to be smaller in the first year, followed by larger increases in the following years to give more time to prepare. We also want to know if consumers are willing to pay more in total due to interest costs in order to smooth the price increases over a longer period.”
Other topics the Commission wants feedback on include:
The length of the investment period. By default, investment applications are for a period of five years. However, Aurora has only applied for three years to allow it more time to improve its asset data to help inform its second investment application. Aurora’s proposed allowance over five years is $609 million
- Consumer preferences on the communication, timing and management of planned and unplanned power cuts while Aurora works to fix its network
- Consumer and stakeholder confidence in Aurora’s ability to deliver on its plan to time, budget and to a high quality, including how Aurora should be held to account for completing the work
- Whether the Covid-19 pandemic has changed consumer feedback on Aurora’s proposal and how the Commission should account for growth and demand uncertainty caused by the pandemic
- Ensuring Aurora’s proposed spending is cost effective in areas like safety improvements, tree trimming, staffing and business costs and that it is targeting the right equipment for replacement at the right time.
The Commission expects to make its draft decision in November and a final decision in March 2021. Aurora’s new revenue limits, reliability standards and consumer price increases will come into effect on 1 April 2021.
The issues paper, including a consumer summary and submission form, along with more information on the project can be found at www.comcom.govt.nz/aurora
Feedback can also be provided by email to feedbackauroraplan@comcom.govt.nz. Consultation closes on 20 August 2020.
Public drop-in sessions and stakeholder meetings will be held in Dunedin, Alexandra, Cromwell, Wanaka and Queenstown between 6-13 August. More details can be found here.
Background
About Aurora Energy
Aurora owns and operates the poles, lines and other equipment that distribute electricity from Transpower’s national grid to more than 90,000 homes, farms and businesses in Dunedin, Central Otago and Queenstown Lakes. Aurora is a wholly owned subsidiary of Dunedin City Holdings Limited, owned by Dunedin City Council. Aurora’s charges are built into power bills and are something its customers are required to pay no matter which power company they are with. Typically, electricity distribution charges make up about a quarter of an average residential consumer's power bill (excluding GST).
Regulation of Aurora
As Aurora is a monopoly and its customers have little choice but to connect to its network, the Commission regulates the total amount of revenue it can earn from its customers and the quality of service it must deliver. It does this by setting revenues and quality standards for local lines companies across New Zealand once every five years. However, if a lines company needs to invest substantially more in its network, it can submit an investment plan to the Commission seeking approval to increase its prices to fund the investment.
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Comments
how about the DCC returns some of the siphoned of funds that should have been spent on the infrastructure? Why should consumers pay extra to cover dcc and Aurora mis-management?
As a person who has suffered a stroke and cannot work anymore any increase comes out of my $30 to $40 a week food budget and thats with me running the hot water cylinder 1 day a week and little heating already . Why should we pay for something we have already paid for?
Well said.
Europe imports its energy as gas from Russia (5-8,000 kms away) which is burnt in turbine and sold for prices around 25c/kWh. We in NZ pay 28c for free water from the heavens in a hydro turbine. Someone is ripping off the NZ consumer.
What happened to the lines charges we were paying that was supposed to fix and maintain the infrastructure? Went into people's pockets (CEO's etc) instead of where it was needed. Why should we pay again for someone else's greed and mismanagement? You can bet on it that we will have to pay increased lines charges once these upgrades have taken place.
But, but, but - the people have been paying upkeep charges for years, where has that coin gone? Oh, I get it - it looks like the fat cats have have been caught with the hands in the till corporate thieving, but that's ok, and now they want people to pay again. How can the people of Dunedin and lying areas be assured that this will not happen again. Let's see some accountability from the DCC and the CEO and senior managers.
This is well below standard. Let's have an audit into this. Is this one of those pyramids rip-off schemes where those at the top get rich move on and those at the bottom keep funding in the hope of one day making it to the top?
This proposal in unacceptable. By their own admission they under-funded the network. They can use the bonuses they pay out to shareholders and pay increases to senior management to fund the upgrades. I can see no reason why we as ratepayers or electricity users should be funding this.
People need to stand up in this country about this. We get ripped off every day. Deregulation of the electricity supply by Max Bradford (National) means throughout NZ we have multiple electricity supply companies all interested in their profits. Look at their executive salaries. Mismanagement of huge income over years means systems fall over. Then we pay for their incompetence. Get organised, everyone should collectively oppose this. If this was overseas, people take a stand - protest, marches etc.
Bang on kiwi's complain nothing happens and we roll over, they keep doing it over and over agin, look at the French farmers, protesting, Look what the council is doing to Dunedin and they sit there smug as and are untouchable, they need called out and be held accountable
Qoute: "For example, would they prefer prices to increase in gradual and steady increments or price increases to be smaller in the first year, followed by larger increases in the following years to give more time to prepare. We also want to know if consumers are willing to pay more in total due to interest costs in order to smooth the price increases over a longer period.”
No, I think we want some answers as to where and why the maintainance money hasn't been invested back into the infrastructure, and then we'd like to see those in charge at the time held financially responsible for the poor management and misappropriation of public funds. The big houses, flash cars, property and personal investments you lot have can be returned to the public by Monday. On Tuesday I'd like to see you lot sentenced for 'theft as a servant'.
The public, the consumer, is paying TWICE, with interest. Again, the 'suits' have let us down.....
And as a footnote, Lee Vandervis had repeatedly asked these questions many many times. WHERE IS THE MONEY!?
Yet, he was constantly shut down and silenced by Cull and his cohorts. Now, finally, the real situation is coming to light. This could well of been investigated and dealt thoroughly with long ago. Now it's become bigger than we can handle. Let this be a lesson to all those who got caught up on personalities rather than the facts of the issues. What a jolly mess.......
So if all us consumers are buying in to replace these poles, does that mean we get to become shareholders in the company, receive dividends annually etc, or maybe we all get to own a pole that we can put our name on ?