New Report Highlights Electricity Lines Companies’ Financial Performance And Service Quality
The Commerce Commission has today published a report and dashboard on the trends in performance of local lines companies to help New Zealanders better understand how and why the prices and service quality of their local electricity lines companies have changed over time.
The report presents analysis of revenue, profitability and reliability trends between 2008 and 2020 at an industry and individual lines company level. Key findings of the report include:
- Profits have been reasonable: The level of profitability across the industry has remained roughly consistent, averaging between 5% to 6% over time, which is below the Commission’s estimates of a reasonable return.
- Lines charges have increased to support infrastructure investment: Households are paying $350 more in lines charges per year now than in 2008 ($165 if adjusted for inflation), with most of this increase spent on network investment. Nearly half of the $350 increase has been passed on to customers from other parties—most notably Transpower, which is recovering the costs of large investments it made in the transmission network.
- There has been little change to reliability: The average number of unplanned power outages per customer across the industry has remained fairly similar over this time. However, most local lines companies have had more planned outages, and these tend to last longer than they used to. Planned outages are required for lines companies to undertake important maintenance and investment work.
Alongside the report, the Commission has created an interactive dashboard that can be used to view the change in performance of each local lines company and the industry as a whole.
Lines charges – transmission (Transpower) and distribution (local lines companies) – make up approximately 38% of the average customer electricity bill.
“Lines companies’ charges make up a significant proportion of New Zealand’s electricity costs. We are therefore keen to provide consumers with the information they need to assess whether the industry and their lines company are working efficiently for their long-term benefit,” Deputy Chair Sue Begg said.
“Our analysis indicates that over the past decade profitability levels have been within a reasonable range and there has been investment in networks, which is important for the long-term security of our electricity supply.”
“The average number of unplanned power outages per customer has been largely stable over time, while the number and length of planned outages have increased. The planned work is undertaken to maintain and renew the network.”
“Some individual companies do stand out as performing better or worse than the average. For example, Nelson Electricity has made the greatest gains in improving its reliability levels, while Vector and Aurora have had significantly worsening reliability, for which they have been penalised in court.” Ms Begg said.
The Commission intends to develop a suite of Trends in local lines company performance reports that focus on a different aspect of the lines sector each year. The interactive dashboard released today will also be continually updated with the latest industry data as it becomes available.