Counting the cost of inaction

Do you feel that chill in the air? It is the chill of another winter of ever-increasing electricity bills.

A fire can take the edge off but in the South’s clean air zones, heaters and heatpumps carry the load as the mercury falls.

The heatpumps’ work is most evident in Cromwell and Alexandra, where smoke hangs less thick in the night air.

Their collective, low drone throbs in the housing areas. It is a little noisy, but a small price to pay for clean air.

It may be a small price to pay, but it is not underpinned by a fixed, standard cost. Electricity costs only ever seem to rise.

Retailers regularly reassess their charges and, remarkably, seldom decide they are charging consumers too much for what they use.

They have obligations to their shareholders and their own costs to meet. And they must also collect payments for others.

Lines charges are levied on behalf of local lines companies, which use the cash to maintain and grow their network while producing a dividend.

The dividend is paid to the lines company owners, sometimes a trust but most often a council-controlled company. In the South, Aurora Energy pays its dividend to the Dunedin City Council.

There is a long and storied history as to how the Dunedin council came to have an interest in the electricity network that also serves Central Otago and the Queenstown Lakes. There is also a long and storied history as to how the dividends continued to flow even as Aurora failed to maintain the asset consumers paid for.

The Central Otago and Queenstown mayors reckoned the city received $117 million from Aurora, via holdings company Dunedin City Holdings, while Aurora failed its network. When Aurora — under new and vital management — prepared its case to ask the Commerce Commission to let it increase its charges to improve its network, the mayors called for the city to repay some of the dividend.

Their calls came to nothing. Indeed, Dunedin City Holdings chairman Keith Cooper last week said there had been ‘‘much ill-informed commentary’’ about the dividends. Even if they had not been paid to the city, Aurora would still be asking the commission for a price path to improve the network.

Simply, it appears customers were not charged what they needed to be charged to ensure the network was kept up to scratch. The company had failed to ensure it had the funding it needed to do the job it patently did not do.

Whatever the case, there is a sizeable cost to inaction and the mayor’s focus on the dividend added to our understanding of the overall cost of Aurora’s vital reinvestment.

The company started the year proposing to invest about $400 million in its network. On Friday, it confirmed its pared-down, $383 million spend would not have any "frills".

Under the new proposal, households in Dunedin would face an average increase of $288 over three years from next year until 2024. Central Otago and Wanaka households will pay more — on average, $360 over the three years — while the average price in Queenstown would climb by $240. This is the catch-up cost on top of everything else consumers paid previously, presumably to keep Aurora’s network up to standard. It ought to have been spent years ago.

Central Otago Mayor Tim Cadogan says residents now have to convince the Commerce Commission that they need lower prices. This is a tall order: anyone can make a submission, but the process is quite removed from the workaday concerns of most people.

Councils, social sector and business groups might be better placed to let the commission know how the charges affect them and their communities, and it is hoped they continue what they started when they commented on Aurora’s original price path proposal.

There is no doubt Aurora needs to spend to make its infrastructure safer, and that the money will have to come from customers. But it is important, even at this late stage in the process, that those most affected ensure the record reflects true cost of years of inaction.