Most would pay more under new power price rules

Aucklanders will save more than $60 a year on their power bills while most other regions could pay more under new monopoly prices set by the Commerce Commission.

The regulator today released its final decision on price caps and minimum quality standards for the 16 electricity distribution companies.

Two distributors - Vector in Auckland and Horizon Energy in the Bay of Plenty - will have to reduce their prices, while the remaining 14 distributors will be able to increase prices by up to 10 per cent.

The new price structure from April next year will affect how much customers pay for power, with distribution costs making up about a third of a customer's bill.

Vector will have to reduce its prices by 10 per cent, or an estimated $5.30 a month off the typical residential customer's bill - a saving of $63.60 a year.

Horizon will have to reduce its prices by 3 per cent, or an estimated saving of $2.10 a month, or $25.20 a year.

The remaining distributors can increase their prices, if they choose, by between 1-10 per cent.

The biggest increase could be made by Top Energy in the Far North, which can put up its prices by 10 per cent - an estimated increase of $8.90 a month, or $106.80 a year.

The price cap decision comes after the Supreme Court this month upheld a Court of Appeal ruling that found the Commerce Commission was not required to determine a starting price input methodology for electricity distribution and gas pipeline services.

Vector had argued the commission should not be allowed to set its caps without first setting an input methodology.

Vector chief executive Simon Mackenzie today said the commission's decision was little different from an earlier draft requiring it to reduce prices by 10 per cent next year, with a further price adjustment in 2014.

The company and seven other parties are appealing before a High Court judge and two independent experts through a merits appeal process.

"The commission is making its final decision as part of the regulatory process, however more importantly our focus remains on the merits appeal process, which is well underway with a decision expected in the first half of next year," Mr Mackenzie said.

Commerce Commission deputy chairwoman Sue Begg said the price caps had been changed to better align distributors' revenues with their costs.

"We aim to create an appropriate balance between providing incentives for these businesses to invest in their networks, while ensuring that consumers are being charged based on the cost of services provided in each region," she said.

"In those regions where we have determined that there needs to be a larger price increase to support network investment, we have smoothed the increases over a number of years. This has helped to avoid more significant price increases in 2013."

Ms Begg said the price reset would eventually flow through to consumers, as either a price increase or decrease on their power bills depending on where they live.

"Businesses are free to decide how to spread the prices across their customer base, or indeed, in the case of increases may decide not to take up the full amount of the allowable increase."

The commission has not reset the pricing for Christchurch distributor Orion, which was still assessing whether to apply for a customised price-quality path to deal with earthquake rebuild issues.


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