Incentive Regulation is needed for monopoly line
MAJOR ELECTRICITY USERS' GROUP
Sunday, 9 July
2000
For immediate release
Media release by the Major Electricity Users’ Group (MEUG)
Churn statistics
show retail electricity competition is alive,
But
Incentive Regulation is needed for monopoly line
charges
All consumers should welcome the news that more
than 10% of electricity consumers in New Zealand have
switched retailer in just over the last year, said the
Chairman of the Major Electricity Users Group Terrence
Currie.
He said, “M-co, the MARIA Administrator, last
week announced an ‘avalanche of customers switch electricity
retailer’. According to M-co, about 5% of consumers switch
retailers in similar electricity markets overseas (ie this
is the churn rate). The churn rate of over 10% for New
Zealand is a clear sign that the retailers have been
competing and tidying up their switching
arrangements.”
“With most if not all consumers having a
choice of energy retailer and increasing numbers exercising
that choice, there are encouraging signs that a healthy
retail market is evolving,” said Mr Currie.
“What
consumers now want to see is some action on the monopolies
in the energy sector. The charges of the transmission and
network companies comprise approximately 50% of an average
households power bill. Consumers need to have confidence
that the charges from these monopolies are not a cent higher
than they should be.”
“The only way the public can be
satisfied that electricity monopolies are cost minimisers is
to have incentive regulation whereby monopolies that achieve
significant cost efficiencies must share those with
customers and shareholders. Shareholders of monopolies (be
they Trust/community owned or by the private sector) that
don’t achieve savings and reduce prices as per the incentive
regulations should not be rewarded.”
“In the UK and
Victoria in Australia, households have had and are expecting
further significant decreases in real terms in their line
charges under incentive regulation regimes. Consumers in
New Zealand also want to confidently know that their line
companies are coming under real pressure to lower costs and
to pass those savings through to consumers” concluded Mr
Currie.
ENDS