Power bills should drop by between $3 and $34 a month for most households in April

Wednesday, 27 November 2019

Most electricity bills should fall in April if power companies pass on a steep drop in lines company charges.

Consumers are being advised to think twice before locking themselves into long-term electricity contracts, ahead of price cuts that should kick in from April.

Electricity bills should fall in most parts of the country as a result of two Commerce Commission rulings that will reduce the revenues lines companies and national-grid operator Transpower can earn from their networks.

Consumers should benefit to the tune of $72 million a year as a result of the regulator's ruling on lines companies on Wednesday.

Those savings come on top of a previously-announced $142m drop in Transpower's annual fees, which are also regulated by the commission and which lines companies pass through in their bills.

Taking into account both changes, the price Vector will charge consumers in Auckland will fall by $4 a month from April, while Orion's prices in Christchurch will fall by $3 a month, according to the commission.

**READ MORE:

Consumers will have lower interest rates to thank for price drop.

* Otago power consumers face $500 price hike over three years

* Commerce Commission to cut Electricity Invercargill Ltd revenue

* WEL Networks drops electricity discount, promises to disrupt market**

In some regions the price changes will be far greater, with Centralines in Hawke's Bay and Kerikeri-based Top Energy both required to reduce their bills by $34 a month.

Lines company costs make up 27 per cent of an average residential consumer's monthly bill, with Transpower's charges chipping in another 11 per cent.

Transpower had already been told to charge less from April, for the national grid.

The only lines company that will be allowed to raise prices is Aurora Energy which supplies 90,000 customers in and around Dunedin, where monthly bills should rise by $1 a month.

The savings estimates provided by the Commerce Commission assume customers are on low-usage tariffs aimed at households that consume less than 8000 kilowatt-hours per year, a commission spokeswoman said.

Commerce Commission deputy chairwoman Sue Begg said lines companies would be able to invest more in maintaining and extending their networks, despite having their revenue caps lowered.

It was difficult to estimate the size of the price drops that the minority of consumers on high-usage plans would see, because of the large variability of high-use tariffs, she said.

Wellington, where lines company Wellington Electricity is currently managed under a slightly different regulatory regime, is one of several regions where lines companies' own charges will remain unchanged for now.

But all consumers should benefit from the drop in Transpower's transmission charges.

Graeme Peters, chief executive of the Electricity Networks Association, which represents the country's 27 local lines companies, noted that after adding in the 15 per cent drop in Transpower's charges, electricity users should be $214m a year better off overall.

'With reductions on the way, consumers should be careful about locking themselves in to fixed-term contracts which extend out for a year or 18 months, as they could miss these substantial network reductions in April,' he said.

The 15 lines companies impacted by the commission's Wednesday ruling will need to decrease their collective annual revenues by 6.7 per cent to $1.01b next year.

Commerce Commission deputy chairman Sue Begg said that decision struck a balance between minimising costs for consumers and ensuring lines companies had incentives to invest in their networks.'For most customers, this reset will result in an initial reduction in distribution charges in April next year.

'This reduction is largely due to lines companies having access to cheaper finance due to low interest rates,' she said.

Vector chief executive Simon Mackenzie said that while it would be lowering its prices from April as required, it would be entirely up to electricity retailers to determine whether the savings would be passed on to customers.

'It is our expectation that the Commerce Commission and Electricity Authority will take steps to ensure this happens,' he said.

After the price drop next year, local lines company charges will then increase in line with inflation over the four years between 2021 and 2025, before the next 'reset'.

Begg said the new 'price-quality paths' stipulated by the commission would still allow lines companies to increase their investment in their networks.

Lines companies expected to spend more than $2 billion over the next five years 'renewing ageing poles and wires and powering growing communities', she said.

But Mackenzie said the lower revenue cap would 'impede Vector's ability to upgrade and maintain Auckland's electricity network to the degree we know is necessary to support population and housing growth'.

HOW MONTHLY POWER BILLS SHOULD CHANGE

Aurora Energy: +$1

Electricity Invercargill: -$3

Horizon Energy: -$3

Orion NZ: -$3

Network Tasman: -$4

Vector Lines: -$4

Nelson Electricity: -$6

EA Networks: -$7

OtagoNet: -$9

Unison Networks: -$9

Alpine Energy: -$16

Eastland Network: -$17

The Lines Company: -$21

Centralines -$34

Top Energy: -$34

Source: Commerce Commission. Note: Assumes customers are on low-usage tariffs aimed at households that consume less than 8000KW/h per year. Figures take into account drop in Transpower's transmission charges which apply nationally.