Electricity profits ‘reasonable’
The Commerce Commission has published a report and dashboard on the performance of local lines companies to help Kiwis better understand how and why prices and service quality have changed.
The report presents analysis of revenue, profitability and reliability trends between 2008 and 2020 at an industry and individual lines company level.
Such information will become increasingly important to the automotive industry as more of the fleet becomes electrified.
Key findings of the report include that profits have been reasonable, which will come as a relief to owners of electric vehicles.
The level of profitability across the industry has remained roughly consistent, averaging between five and six per cent over time, which is below the commission’s estimates of a reasonable return.
The regulator says lines charges have increased to support infrastructure investment.
Households are paying $350 more in such charges per year now than in 2008 – $165 if adjusted for inflation – with most of this increase spent on network investment.
Nearly half of that increase has been passed onto customers from other parties most notably Transpower, which is recovering the costs of large network investments it has made.
The regulator also notes there has been little change to reliability. The average number of unplanned power outages per customer across the industry has remained similar over this time.
However, most lines companies have had more planned outages, which tend to last longer than they used to. These are required to undertake important maintenance and investment work.
Alongside the report, the commission has created an interactive dashboard that can be used to view the change in performance of each lines company and the industry as a whole.
Lines charges – for transmission via Transpower and distribution through local lines operators – make up about 38 per cent of the average customer electricity bill.
“Lines companies’ charges make up a significant proportion of New Zealand’s electricity costs,” says Sue Begg, pictured, commission deputy chairwoman.
“We’re keen to provide consumers with information they need to assess whether the industry and lines company are working efficiently for their long-term benefit.
“Our analysis indicates that over the past decade profitability levels have been within a reasonable range and there has been investment in networks, which is important for the long-term security of our electricity supply.”
The commission intends to develop a suite of trends in local lines company performance reports that focus on a different aspect of the sector each year.
The interactive dashboard is continually updated with the latest data as it becomes available.
A copy of the report, fact sheet of the key findings and link to the dashboard can be found here.