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Powerco Welcomes Commerce Commission Decision

Powerco Welcomes Balanced Commerce Commission Decision

Powerco today welcomed the Commerce Commission’s announcement of its plans to delay decisions on price control thresholds for electricity lines businesses.

Lines businesses have been asked to hold nominal prices for a year while the Commerce Commission investigates the matter further.

Powerco Chief Executive, Steven Boulton, said today Powerco would hold its nominal electricity prices, and would work with the Commission to assist in the development of a constructive and workable regime.

“Powerco has been holding its average nominal electricity prices steady for the past five years, so this is consistent with our plans for the 2003/04 financial year,” Mr Boulton said.

Mr Boulton said lines business pricing was an extremely complex matter

“The Commission simply needs more time, and further discussions with the industry, to establish an effective regime. The pricing will need to reflect the substantially different asset types, geography and load demands placed on each network by it customers. This analysis will take some time to ensure that when the final decision is made, it is the right one.

“We are committed to working with the Commission over the coming year on this crucial matter and Powerco will be actively engaged in developing robust input and solutions for the Commission.”

Powerco also welcomed the Commission’s decision to move away from its proposed profit threshold, focusing instead on the price and quality thresholds, and the decision to treat transmission and utility rating costs as pass-through costs.

“This change means that lines companies can now continue to take a balanced stakeholder approach that supports the Government’s initiatives on national economic growth. Without the heavy-handed profit threshold, lines companies will be able to continue to provide the necessary infrastructure support for new connections.

Mr Boulton said the announcement also meant that Powerco would now be able to accelerate discussions on distributed generation projects – projects where generation is linked directly to the distribution network – which had been on hold because of the intrusive nature and uncertainty associated with the Commission’s previous draft decisions.

“Distributed generation is a crucial part of the answer to the country’s growing electricity supply concerns. The previous regulatory proposals meant that a number of projects were stalled. While there are still some issues to work through, the path to an outcome has partially been cleared.

Mr Boulton noted that although Powerco was strongly supportive of the Commission’s announcement, there were still a number of matters that needed to be resolved.

“Appropriate X factors will still be required to ensure that we do not see asset rundown and the consequential infrastructure degradation. Setting the wrong X factors could still be an impediment to ongoing investment in infrastructure.

“The ODV handbook also needs to be updated to ensure that the asset investment, if made by lines companies, is accurately valued to ensure adequate return on investment.”

Powerco is New Zealand’s second largest electricity distribution company, serving 400,000 customers in the North Island. Powerco is a NZSE publicly listed company.

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