Final decision on lines charges likely to see power bills go up $10 a month

Wednesday, 20 November 2024

Commerce Commission says increased investment by lines companies and Transpower is in customers’ long-term interests.

The Commerce Commission expects power bills to rise by about $10 a month on average from April and by a further $5 a month in each of the following four years as a result of a regulatory decision.

The price rises are expected because the commission has agreed to loosen the revenue caps it imposes on lines companies and national grid operator Transpower, to enable them to invest more in their networks.

The price rises tipped by the commission would be in addition to any increases power retailers imposed to pay for their own costs or to contribute to their profits.

It would also come on top of any further increase in fixed daily power charges the Government allowed in April and following years as a result of the possible continued phase out of low-user tariffs.

In a small silver-lining for consumers, the increase in the revenue caps has been dialled back slightly from a draft decision the commission released in May, when it expected the impact would be a $15 monthly rise in April, followed by the further $5 a month increases in subsequent years.

Contact Energy has already begun anticipating the higher lines charges, using them as a justification for 10% price rises it announced last month.

The Electricity Authority is separately consulting on whether to increase its own levy on household bills by an average of 12 cents per month, to $2.06 a month.

Commerce Commission commissioner Vhari McWha said the increased lines company and Transpower charges were ultimately in consumers’ interests.

“While the decisions mean there will be an increase in the prices most consumers see in their electricity bills, we also understand the importance of incentivising businesses to invest, improve, and meet consumer demands,” she said.

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“Deferring investment would mean even higher future prices and a network that does not meet consumers’ needs.”

A growing population, an increase in extreme weather events and greater reliance on electricity as a fuel in transport and industrial processes had all contributed to the pressure on lines companies and Transpower, McWha said.

“With much of New Zealand’s electricity grid built decades ago, renewal work is essential to meet the future needs of consumers.”

But the lagged impact of recent high inflation and interest rates had been the major factor behind its decision to raise revenue caps, she made clear.

“The revenue increases reflect the higher costs companies are facing, including the cost of borrowing, cost of materials and inflationary pressures since the last revenue review in 2019.

“Higher inflation and interest rates relate to about 55% of the increase in revenues,” she said.

Energy Minister Simeon Brown said the commission had done its job, which involved reflecting the impact of inflation and interest rates when it set the revenue caps.

“This is a flow-on of the inflationary pressure that we have had going through the economy with high interest rates. So we feel the pain that this will be having on consumers,” he said.