Tracks electricity distributor trends 2008

Commerce Commission

Wednesday 30th January 2013

A new report from the Commerce Commission gives consumers information on how well their local electricity distribution business is performing.

The report, Electricity distributors’ performance from 2008 to 2011, covers key aspects of performance of interest to customers, including revenue, demand, service reliability and expenditure on the network. It shows trends and comparisons across the industry as a whole, and for the 29 individual businesses.

The industry trend was for increases in revenue, total expenditure and demand, but there was wide variation across individual distributors. Overall reliability of services was largely unchanged.

Commerce Commission General Manager Regulation, Dr John Hamill, said that total revenue across all 29 distributors had increased by 5% above inflation over the four years.

“What we have seen over 2008 to 2011 at an industry level is that electricity distribution prices have increased, though again, there is wide variation among distribution businesses,” said Dr Hamill.

Dr Hamill said that some of the increase in revenue for the industry was due to increasing demand for electricity distribution services, but it was mostly due to prices increasing for reasons such as the need for investment in the network and increased operating costs.

Dr Hamill said that a recent price reset for the 16 distributors subject to price-quality regulation was not covered in the new report as it fell outside the 2008 to 2011 time period.

The overall trend for electricity outages across the industry had not changed over the three year period, but reliability varied widely between businesses.

“Some distributors had a significantly larger number of outages, and a significantly longer duration of outages than others,” Dr Hamill said.

Total expenditure in the electricity distribution industry increased faster than inflation from 2008 to 2011. Operating expenditure grew 6% over and above inflation from 2008 to 2011 while capital expenditure grew 8% above inflation over the same period.

“The Commission’s role is to summarise and analyse the information provided by distribution businesses to give transparency about how they are performing,” said Dr Hamill. “We hope that reports like this will provide useful information for the distributors and their stakeholders to keep improving business performance.”

All information in the report is publicly available, but this the first time it has been brought together in one document.

A copy of the report, including links to individual distributor chapters, is available on the Commission’s website. http://www.comcom.govt.nz/electricity-distributors-performance-from-2008-to-2011/

Background

There are 29 electricity distribution businesses in New Zealand. Distributors transport electricity to homes and businesses. Distribution charges account for around a quarter of a typical household bill. Part of their charge goes towards maintaining and investing in the network.

The Commission regulates electricity distributors under the Commerce Act because there is little or no competition in this market. The Commission’s regulation aims to ensure there is an appropriate balance between providing incentives for suppliers to invest in their regulated services, and ensuring that their prices are aligned with the cost of services they provide.

All electricity distributors are subject to information disclosure regulation, under which they must publish information such as prices, measures of quality, financial information, plans for managing and investing in their assets, and forecasts of future expenditure (including investment planned in the network). In 2012 the Commission set new information requirements for all of the distributors.

Price-quality paths are regulatory controls for electricity distributors that do not meet the definition of consumer-owned set in the legislation. Seventeen electricity distributors are subject to price-quality paths. The Commission reset the default price-quality paths for 16 electricity distributors in November 2012 with new price limits taking effect from 1 April 2013. The remaining 12 distributors are subject to information disclosure only.

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