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ENA response to Commerce Commission DPP decision

ENA response to Commerce Commission Default Price-Quality Path (DPP) decision

Electricity consumers should think twice about locking themselves to fixed-term contracts with retailers, after the Commerce Commission slashed revenues of network companies, says Graeme Peters, chief executive of the Electricity Networks Association.

Average lines charges for most consumers will fall nearly seven percent in April, though the actual dollar amount will vary from region to region, according to the commission’s final decisions released today.

The lines component makes up about 26 percent of the average bill.

“Lines companies expect that these reductions will be passed to qualifying consumers from April 1, and ENA fully supports the Commission saying it would publicise this expectation for full pass through to consumers,” Mr Peters said.

The commission’s ‘default’ pricing decisions apply to 15 lines companies on the default price-quality path, or about 60 percent of New Zealand’s households and businesses. The period for which the pricing decisions are in effect is from 2020 to 2025.

However all New Zealand’s two million consumers should benefit from a 15 percent cut to Transpower’s revenues, down $142 million.

The benefits of a combined $214 million reduction in transmission and distribution charges in 2020/21 will be passed to New Zealand’s 40 retailers, which send bills to consumers.

“With reductions on the way, consumers should be careful about locking themselves in to fixed term contracts which extend out for a year or 18 months, as they could miss these substantial network reductions in April.”

While there were dollar benefits for many consumers, Peters said he was disappointed by the commission’s lack of engagement with consumers when making important judgments.

“These decisions are highly complex and, even though they are public consultations, consumers are not supported in getting their views into the process. We expect substantial improvement when the government launches its Consumer Advocacy Council next year, which will amplify the consumer voice and hopefully influence future decisions.”

The ENA has been operating a Consumer Reference Panel for 18 months, as it sees the value in listening to customers about their expectations around price and quality.

Peters said members would be disheartened that many good ideas put forward by industry, including more customer involvement in quality targets, had not been adopted the commission.

Lines companies were also discouraged at no increase in a miserly innovation allowance of 0.1 percent of revenues, or $5.5 million.

“This sums to only $1 million a year, which is not enough for lines companies to tick off a long list of technical and operational improvements expected by the commission and Electricity Authority in areas such as, for example, open access to networks.”

Like any referee, the commission has a difficult job but this particular reset has not met ENA expectations in areas such as correcting risk and inflation forecasting errors, and consumer engagement.

“We do commend the commission, however, on improving the way it is measuring quality, and the sector looks forward to meaningful engagement next year on further improvements to the information disclosure regime.”


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