Aurora Energy distributes electricity to consumers in Dunedin, Central Otago and Queenstown Lakes. In Arrowtown our electricity comes via the high-voltage substation in Frankton.
Aurora charges the major electricity retailers (not consumers directly) for the HV transmission and the distribution networks. The amount they charge retailers also includes charges from the Transpower national network. Ultimately major retailers pass on these costs to us, the consumers, each using their own pricing methodology.
Under-investment by Aurora
The Commerce Commission regulates the electricity lines industry. In 2018 the Commission found Aurora had significantly under-invested in the network, leading to poor reliability and safety concerns. It prosecuted Aurora over its performance and the company was fined. The Commission also found Aurora had the lowest lines charges of any network company in New Zealand and the lowest level of profitability. In other words, contrary to many of the assertions being made and reported in the press, consumers benefited from reduced power charges made possible by under-investment.
Now, needing to repair and upgrade its network, Aurora has asked the Commerce Commission for permission to increase charges beyond what is allowed by price-quality regulation.
What the Commerce Commission says
The Commerce Commission has agreed to an increase in lines charges, although not as much as Aurora requested. However, even the smaller increase could by 2025/26 add around $33 to the monthly power bill of a medium-sized Queenstown residential customer. So the Commission has two proposals for how the increase could be managed.
In Scenario 1, lines charges go up 10% every year from 1 April 2021 to 31 March 2026.
In Scenario 2 there would be an initial increase of 5%, then increases of 10% each year. This would defer $38m of Aurora’s revenues until after 2025/26, but the total required would be more overall ($10m) accounting for interest costs. This means lines charges would have to stay higher for longer.
Your feedback is valuable!
The Commission is looking for consumer feedback on the options, but you'll need to get your response in by 18 December 2020 (NB the date on the feedback form is incorrect). For more information, please follow the link to the Commerce Commission's page on the proposal. Once you follow the link you will find the Documents Tab. There are 21 in total. For the most useful, follow these links below: