More latitude for Aurora, Boult says

Jim Boult. Photo: ODT files
Jim Boult. Photo: ODT files
Aurora Energy needs to be given some freedom to sort out its problems, Queenstown Lakes Mayor Jim Boult says.

The Queenstown district council remains concerned about proposed price shocks, as well as underinvestment in the lines network.

The council has told the Commerce Commission it is alarmed by Aurora’s reaction to the draft decision on pricing, which said

the amount Aurora could claw back from customers in the next five years would be $86million less than the $609million it had sought to fix safety and reliability problems.

Aurora says the draft decision would be so constraining it would seriously affect its ability to deliver and support its essential works programme.

In its latest submission, the QLDC said it "cannot and will not accept the risk that Aurora has outlined" and "we cannot place our community, our economy and our reputation at risk".

Asked if proposed price hikes were less worrying than Aurora being potentially hamstrung on the amount it could spend on its network, Mr Boult said both problems remained a concern.

He also wanted the Dunedin City Council, which owns Aurora through Dunedin City Holdings Ltd, to consider whether past dividend payments were reasonable.

The city council has been criticised for historically accepting dividends at the same time as Aurora was operating a rundown network.

Mr Boult suggested the DCC could help make up for that.

"There needs to be money spent on the network. We don’t like the way it’s loaded towards Central Otago, Queenstown and Wanaka."

The Central Otago District Council has not added to its previous submissions.

However, in his submission on behalf of his council last month, Central Otago Mayor Tim Cadogan urged the commission to keep a vigilant eye on Aurora.

The commission’s role as watchdog was not to be "sitting in its kennel, but straining at the end of its leash", to make sure the company fulfilled its obligations, he said.

The increases in charges suggested in the draft decision remained "unacceptable to our community and we recognise and acknowledge the deep sense of hurt that our people and businesses feel about the current situation".

Mr Cadogan said the company was ultimately owned by the people of Dunedin. The Queenstown part of the network did not suffer from a monopoly, as there was a competitor in the area.

"Only Central Otago stands exposed to the full threat of monopoly behaviour."

Among the recent submissions was one by Horowhenua and Kapiti company Electra.

It argued a 10% cap on total revenue growth would unfairly shift risk to Aurora.

The commission favoured a 10% cap as a way to smooth out price shocks.

The commission is due to make its final decision on Aurora’s application at the end of March.

Comments

It's kind of ironic that council leaders other than the DCC's are more aware of the reasons for Aurora's problems and are prepared to say why. The DCC's stance on the excessive dividend payments has always been 'move along, nothing to see here'. There are still many skeletons in this particular cupboard.

They were happily not doing this maintenance with no consideration to their customer base and now they feel constrained they are not able to deliver the standard of fix of network problems that arose because they were not doing these fixes. It is for the shareholders to pay for asset value improvement and maintenance and for the customer to pay an annuity for the use over the lifetime of the asset. The standard business model is being badly distorted by seeking customers pay for asset capital value in addition to their use of those assets.

Indeed Nighttimejohn. The silence has been deafening on this, especially from recent councillors voted in because of their supposed business acumen. They were quite vocal in their criticisms before they got their feet under the council table!

9.8% rates increase is to enable deferred maintenance on water network, Aurora funding increase to fund deferred maintenance on the electrical network. The DCC council, councillors and mayors and so called Dunedin business leaders have been bleeding the assets for cash for decades. Now they want that rectified and paid for in a five year period. What do these so called businessmen not understand about finance 101.

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