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Regulator clips Orion’s attempt to claw back quake costs

Regulator clips Orion’s attempt to claw back $86 mln in earthquake costs

Aug 14 (BusinessDesk) - The Commerce Commission plans to let Christchurch electricity lines company Orion New Zealand hike its prices to recover earthquake rebuilding costs, but in a much smaller way than Orion is seeking.

The regulator’s draft decision would let Orion lift prices 9.2 percent in 2014, or about $5.20 a month for a typical household, with further annual increases at the rate of inflation until 2019, it said in a statement. That’s lower than Orion’s proposal to hike prices 15 percent, or $8.50 a month, in year one, with subsequent annual increase of inflation plus 1.2 percent until 2019.

Orion was hoping to squeeze an extra $86 million out of its customers to rebuild its network, which was damaged by the Canterbury earthquakes, of which half would be recovered in the five-year period. The regulator took the view that it should only be able to claw back $28.6 million in the period.

“We consider Orion’s customised pricing proposal to the commission asks for ‘too much, too soon’,” deputy commission chair Sue Begg said. “We have allowed Orion more income to cater for changes in demand and to recover future higher costs caused the earthquakes, but the full level of expenditure Orion has sought is not supported with sufficient evidence in its proposal.”

Thousands of Christchurch residents lost power during the spate of earthquakes through 2010 and 2011, costing Orion $20 million in extra operating costs and forcing it to signal significantly increased debt levels in coming years.

The lines company, owned by the Christchurch and Selwyn councils, applied to the commission in February to increase its prices and reduce its quality targets.

Interested parties can make submissions on the draft determination until Sept. 20, with cross-submissions due by Oct. 11. A final determination is expected by Nov. 29, to take effect for the year starting April 1 2014.


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