Forget the fantasy solution to Aurora's upgrade needs

Wednesday, 10 June 2020

OPINION: I have a friend who uses the line “I work on the Disney theory, being I’d rather put my energy into Tomorrowland than Fantasyland”.

I have applied that theory in not joining calls for the Dunedin City Council to repay tens of millions of dollars taken in dividends from the holding company that owns Aurora to the vast sum that is required to bring the power network in Central Otago, Queenstown Lakes and Dunedin up to scratch.

Whatever moral justification there may be for that argument, it is simply not going to happen, and I believe my and community efforts are best applied elsewhere.

When I say elsewhere, I refer primarily to the Aurora Customised Price-Quality Path (CPP) application currently in front of the Commerce Commission. This process will largely determine the outcome of the application for the significant price increases Aurora is seeking.

* Otago power company Aurora slapped with $5m Commerce Commission fine

* Dunedin council 'fleeced' Central Otago and Queenstown with $117m Aurora dividends

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

* Otago power consumer price hikes in pipeline

* Otago power poles still failing due to 'prolonged under-investment'

Looking backwards to admitted past failings does not change the fact that Aurora needs to invest, and has been investing, in its infrastructure. Too many poles have fallen over and too many unplanned power cuts have occurred to think otherwise.

The brutal reality is that the funds needed for that investment will only come from users.

Much and all as those of us living in Central may wish for the DCC to pay money directly back in to the lines network it owns, that would involve the ratepayers of Dunedin agreeing to that happening at their expense, and let’s face it, that thought lies in Fantasyland.

Looking to Tomorrowland, there are three crucial aspects though that need close scrutiny, being:

1. How much? The Commerce Commission needs to look extremely closely at every dollar of extra expenditure that Aurora is asking for.

2. How long? Aurora seeks a CPP over three years. The five-year maximum that the commission can impose will stretch the cost over a longer period, helping to ease the pain. Having said that, it appears inevitable that another CPP will be sought at the end of this one no matter the length.

3. How is the cost divided? Presently the path Aurora is advocating is that its network is divided into three areas, being Dunedin, Queenstown and Central Otago. Aurora’s version of “Central Otago” includes Wanaka. Each of these areas is set under the Aurora proposal to have different average increases based on (loosely speaking) the amount of work required divided by the number of users. Under the proposal, Dunedin and Queenstown will have 16% average rises while Central Otago can expect a staggering 23 per cent rise.

Should Aurora treat its network as one whole instead of dividing it into three different areas (and there is no legal impediment to this), the increase to Central Otago would be around one third less than the 23 per cent anticipated, Queenstown would be about one tenth while Dunedin would rise by around one quarter from their current anticipated levels.

It is crucial to note here that how Aurora wishes to divide up whatever price increase is allowed is not within the powers of the Commerce Commission. The process is that once the commission determines the quantum, a Distribution Pricing Methodology is applied and managed by the Electricity Authority. That is a fight for another day.

In the interim, I urge the Central Otago public to start the process of engagement by going to the Commerce Commission webpage and following the links from there. Council is working to assist the commission in having face-to-face meetings in Central Otago now Level 1 allows for such.

Speaking of Level 1; how blessed are we?

I have to admit that I am getting a little short-tempered with people saying, with 20/20 hindsight and a Masters Degree in Epidemiology from the University of Knowitallia that things could have been done better.

I just looked up some figures. Ireland is a nation very similar to us with about the same number of people. It’s an island nation with one big city and a few smaller ones but a lot of rural folk as well. As of early this week Ireland has 1683 dead. We have 22.

And their unemployment has gone from 5.4 per cent to 16.5 per cent while ANZ this week cautiously predicted that NZ may not hit 10 per cent.

Time will tell if that's true, but right now, we are just so damned fortunate to be in the position we are in.

There is no doubt that there will be tough times ahead economically, but there are few places better placed in the world right now to face that than New Zealand.

Tim Cadogan is the Central Otago Mayor.

Some figures quoted in this story, correct at the time of publication, have been overtaken by Aurora's announcement of Friday July 12