TrustPower entrenches home-town advantage as locals prefer cheques to charity
By Pattrick Smellie
March 21 (BusinessDesk) - The Tauranga Electricity Consumer Trust has abandoned plans to become a funder for Bay of Plenty community projects after strong pushback from customers of locally headquartered TrustPower who prefer to receive an annual cheque that helps offset their personal power bills.
The decision effectively entrenches Infratil-controlled TrustPower's competitive advantage in the Tauranga electricity network area because only TrustPower customers are eligible for the annual cheque, worth between $400 and $500 in most years. The trust had considered becoming a community projects funder but dropped the idea after considering some 21,000 written submissions.
“The debate became a philosophical one between those who want to keep the status quo, where individuals receive a cheque and those who wanted to take the compensation offered and see the trust evolve into one that could help Tauranga and Western BOP communities for generations to come," said TECT chair Bill Holland in a statement.
First NZ Capital estimated in January that the TECT proposal could have eventually wiped up to $30 million off TrustPower's annual profit as other electricity companies made more effort to compete against it in the Tauranga network area.
The broking firm estimated that Trustpower customers may only get a true benefit of around $50 to $100 a year from the annual TECT dividends, because of the high tariffs that Trustpower is able to charge because of the TECT arrangement. If there was more competition in the area, power prices could be expected to drop, potentially leaving all electricity consumers in the area better off.
In a statement this evening, the TECT trustees said they were withdrawing their proposal to convert the trust into an entirely charitable trust from 2023 after two-thirds of the 21,000 written submissions on the proposal opposed it.
That was despite the trust offering an up-front payment of $2,500 and $360 a year for the next five years for all current TrustPower customers in the electricity network area. Customers of other power companies in the area are not eligible for trust distributions. While TrustPower's market share in the area has fallen from 81 percent in 2010 to 69 percent by late 2017, according to Electricity Authority figures, the company's hold on the territory is very high by national standards.
“We maintained throughout this process that the wishes of consumers would remain at the heart of our decision-making and the consumers have clearly spoken,” said Holland.
"Although one-third of written submitters supported the proposal, the majority were opposed with many providing suggestions about other alternatives. The Trustees are unanimous that the representation from consumers is to withdraw the proposal rather than taking it to a referendum.
“The discussions at the four information sessions, as well as the feedback from the 21,000 written submissions and four days of oral hearings from approximately 130 individuals, showed there to be immense passion within the community for the trust. Consumers should anticipate a distribution plan that looks very similar to that from 2017,” Holland said.
TrustPower shares were unchanged at $5.20 and have fallen 13 percent this year.