Auckland households to get record $335 electricity dividend
By Fiona Rotherham
Sept. 24 (BusinessDesk) - Hundreds of Auckland householders are receiving a financial boost of $335 today, in a record annual electricity dividend totalling $105 million from Auckland Energy Consumer Trust
The trust is making its annual payment to more than 316,000 households, businesses, schools and community groups who are customers of power lines company Vector throughout central Auckland, Manukau and northern Papakura. They receive the payments regardless of which power retailer they are signed up with. The independent trust's 75.4 percent stake in listed Vector is now worth about $2 billion.
The dividend is up $5 on last year's $330 despite a 2,500 rise in the number of eligible beneficiaries in the past year. Trust chief executive Ian Ward said it was getting more difficult to sustain the level of dividend as housing intensification in Auckland and other factors had driven up the number of beneficiaries by an average 2,000 a year in recent years.
"Each year we have to take that into account. It does put a bit of pressure on the company to keep sustaining that and produce growing profits," he said.
One of the biggest problems in maintaining the payout level is withholding tax, which cost the trust about $8 million this year. That's because there is a 5 percent gap between the corporate tax rate of 28 per cent Vector pays on its dividends - the source of the payout to beneficiaries - and the 33 per cent rate charged on the payment to the trust's beneficiaries.
Householders on a lower personal tax rate than 33 percent are likely to be eligible for a small refund but Ward said many don't have the skills to claim it. The trust has lobbied MPs on the issue including Revenue Minister Todd McClay, who initially turned down taking any action. The trust said that wasn't good enough and asked for a rethink and the matter is still awaiting a final response from the Inland Revenue Department and the minister.
Only 11 percent of beneficiaries have opted for a credit on their power bill instead of the cash payout, although this is the only option for some of the other independent electricity trusts that pay dividends to beneficiaries. Some 47 percent chose this year to get the payout direct credited into their bank accounts.
The AECT was formed in 1993 under a trust deed for 80 years, the maximum allowed under New Zealand trust law, on behalf of electricity consumers in the area that used to be served by the old Auckland Electric Power Board. Ownership would revert to the Auckland Council after 2073. The trust has paid out more than $1.1 billion in dividends to Aucklanders over the past 20 years.
Total costs for the trust management in the last financial year were $3.6 million, which Ward said compared favourably with other investment organisations and trusts, particularly KiwiSaver managers.