Get ready for even higher power bills

, posted: 10-Aug-2006 08:55

Think you're paying a lot already for electricity in Auckland? Too bad. It's going to cost even more soon, after the Commerce Commission said it will implement price controls on Vector, with 650,000 powerline customers.

Well, that's what the Herald thinks, because apparently Vector's been over-charging Wellingtonians and under-charging Aucklanders.

The Commerce Commission says:

Vector is overcharging some customers and undercharging others. The company is making different rates of return from its 21 different customer classes and these differences can not be justified. For example, during the 2006/2007 year, Vector will earn a 54.4% rate of return on investment from one group of Northern business customers, while it earns only a 4.6% rate of return from Auckland residential customers.

Vector is earning excess revenues
. The Commission’s preliminary estimate is that, during the next two years, Vector will earn between $13 million and $75 million in excess revenue per annum. To bring its returns to a normal level, the Commission estimates Vector would need to reduce its charges between 2% and 11% for each of the next two years. (Vector’s distribution charges comprise around 20 to 40% of the customer’s power bill.)

Looking at the table on the ComCom website, you can see that Commission thinks Vector has been overcharging customers by a huge margin. The inference is that Vector has subsidised Auckland residential customers by ripping off mainly businesses in Wellington and northern areas.

The Herald story says the Commission is negotiating with Vector to implement a plan that would see line rates increase by 4.6 per cent to March next year, and 2.8 per cent for the following two years. The flipside to Auckland power prices being hiked is that they'll go down elsewhere, and by substantial amounts as well.

Just what Auckland needed, on top of rising council rates, higher petrol prices, interest rates going up and other utilities like water becoming dearer. Too bad incomes aren't going up to compensate.

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