Benefits to Buller consumers from Pulse investment
Buller Electricity is pleased to release the results of an investigation into the benefits to consumers in the Buller region arising as a consequence of their investment in Pulse Energy Limited (Pulse). Buller Electricity commissioned Andrew Shelley an independent economist to undertake the investigation.
A primary driver for Buller Electricity investing in Pulse was a desire to encourage retail competition in the Buller region. Historically, consumers connected to the Buller Electricity network have faced some of the highest electricity prices in the country. In part it was assumed that this was a consequence of a lack of retail competition and therefore any improvement in the level of completion would provide benefits to consumers.
Buller Electricity Chairman Frank Dooley said that the investment in Pulse has been the focus of attention by a number of parties, but it is pleasing to announce that analysis by Mr Shelley indicates the benefit to Buller domestic consumers resulting from the investment can be estimated at $575,000 per annum or $4.76 million over 10 years. Mr Dooley also noted that this benefit does not include the benefits that may accrue to commercial consumers or to Buller Electricity as an investor in Pulse, such as future dividends or the increase in the capital value of shares owned.
"There has been a lot of talk in recent weeks about changes that need to be made in the electricity sector to benefit consumers" said Buller Electricity Chief Executive Erik Westergaard. "This report highlights how important it is for regulators to foster and sustain real competition, especially in the regions where competitive pressures may not be strong. The research by Mr Shelley has highlighted a possible problem with electricity markets in some areas of New Zealand. It has been known for some time that an absence of generation in a region and the risk of transmission constraints create a potential barrier to entry to retail electricity markets with the natural consequence being higher electricity prices for consumers in some regions. It is important when considering changes to the electricity market that policy makers reflect on the consequences that those changes have on regional communities as well as the broader national benefit tests that they may apply."
The benefit to a residential low user is estimated to be $120 per year while standard tariff residential customers have an estimated $177 benefit, reflecting their higher electricity consumption. "This is money that is going to be spent by consumers in the local community, benefitting local business as well, so the economic benefit to the region will likely be higher than the $575,000 estimate in the report" said Mr Dooley.
Mr Westergaard noted that this benefit was incremental to the price reduction that consumers may receive as a consequence of moving to the best retail price option for them.
Buller Electricity is the majority shareholder in Pulse holding approximately 59% of issued shares. Pulse currently has a market share of roughly 20% of ICPs on the Buller Electricity network.