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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



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