Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Regulator cuts future Horizon Energy earnings in settlement

Regulator cuts future Horizon Energy earnings in out of court settlement

By Suze Metherell

Sep. 5 (BusinessDesk) - The Commerce Commission will cut the amount Horizon Energy can earn in coming years as part of an out-of-court settlement with the lines company after it earned 3 percent more than its regulated pricing allows.

In the year ended March 31, 2012 the Whakatane-based electricity distributor exceeded its price path by $645,686, when it made an annual profit of $6.4 million on $36.5 million in sales, the regulator said in a statement. Under the settlement, Horizon Energy will have to reduce its future earnings. In 2015, Horizon Energy’s earnings will be cut by at least $727,934 to compensate for the amount it over charged in the 2012 year.

“Horizon Energy’s breach was not intentional, and occurred as a result of variations between forecasts used to set prices and outcomes, and calculation errors” Commerce Commission deputy chair Sue Begg said. “The settlement was therefore designed to remove the amount Horizon Energy gained from exceeding its price path, rather than to penalise them.”

Under the regulation, where electricity distributors operate with an effective monopoly they must provide the commission with an annual self-assessment against the price path, which is the total amount it can changed for its regulated services. Last December the commission reached a similar agreement with Wellington Electricity which had breached its price path by 0.1 percent, or $116,800, in the year ended March 2012.

In the 2014 year Horizon reported an annual profit of $7.2 million on $104 million in sales. According to its 2014 annual report the company set aside a $380,000 provision in the year and recognising ongoing negotiations with the regulator towards a settlement, which it said could be as much as $827,000 based on the commission's calculations.

“Horizon Energy is disappointed that there continues to be no enforcement guidelines in place to provide certainty for electricity distribution businesses, and that it took over a year for the commission to initiate the matter with the company despite the company proactively raising the matter with the commission," Horizon chairman Rob Tait said in a separate statement. “The company is required to reduce its prices for distribution services next year, the benefit of this compensation may not necessarily make its way to consumers in the form of lower power bills as it is entirely up to the various energy retailers who operate on Horizon Energy’s network to pass on this compensation to their customers."

Tension between energy distributors and retailers came to a head earlier this year when the Electricity Authority said it was "unacceptable" for energy retailers to blame other parts of the sector for price hikes. Both Genesis Energy and Contact Energy announced price increases from April this year to offset increased costs from higher transmission and distribution fees, which lines and distribution companies say exceed the additional costs imposed on consumers.

In late February the commission ruled that state-owned national grid provider, Transpower, would be required to publicly disclose information about its pricing and network management. Under the new requirements Transpower must also disclose information about its investment, innovation and financial performance.

Meanwhile the electricity generator-retailers are facing increased regulatory uncertainty ahead of this month's general election. The Opposition Labour and Green parties want to create a single, state-owned power buyer and a restructured pricing model, to eliminate what they see as excessive power company profits and pass savings onto consumers through cheaper electricity prices.

Shares of Horizon were unchanged at $3.30, and have fallen 1.5 percent this year.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business: RBNZ Starts Talks On Tougher Rules For Property Speculators

The Reserve Bank of New Zealand is stepping up preparations to restrict lending to residential property investors as it watches house prices, particularly in Auckland, continue to rise strongly. More>>

ALSO:

Research: ‘Ageing Well’ Science Challenge Launched

Science and Innovation Minister Steven Joyce today launched the Ageing Well National Science Challenge, confirming initial funding of $14.6 million. More>>

ALSO:

Scoop Business: Govt Resisting Pressure To Pump More Cash Into Solid Energy

Prime Minister John Key says it is “not the government’s preferred option” to make a fresh capital injection into the troubled state-owned coal miner, Solid Energy, but dodged journalists’ questions at his weekly press conference on whether that might prove necessary... More>>

ALSO:

Lagest Ever Privacy Breach Award: NZCU Baywide Accepts “Severe” Censure In Cake Case

NZCU Baywide says that once it was found to have committed a breach of a former staff member’s privacy, it had attempted to resolve the matter... the censure and remedies for its actions taken almost three years ago are “severe” but accepted, and will hopefully draw a line under the matter. More>>

ALSO:

Scoop Business: PayPal Stops Processing Mega Payments; NZX Listing Still On

PayPal has ceased processing payments for Mega, the file storage and encryption firm looking to join the New Zealand stock market via a reverse listing of TRS Investments, amid claims it is not a legitimate cloud storage service. More>>

ALSO:

Housing Policy: Auckland Densification As Popular As Ebola, English Says

Finance Minister Bill English said calls by the Reserve Bank Governor for more densification in Auckland’s housing were “about as popular in parts of Auckland as Ebola” would be. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news