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Questions Over Whether Electricity Retailers Absorbed Lines Charges By Increasing Power Prices

First published in Energy and Environment on June 2, 2020.

Following Energy and Environment’s story last week about how the rise in the energy component of retail bills had neutralised line charge decreases, the Electricity Networks Association has asked the Electricity Authority to bring forward its investigation into whether lines charge reductions have been passed to consumers saying they clearly haven’t.

ENA chief executive Graeme Peters said new data shows price increases by generators and retailers have overridden the lines charge reductions introduced on April 1.

Energy and Environment reported the Quarterly Survey of Domestic Electricity Prices up until to May 2020 (covering the traditional April 1 period for tariff changes) shows the ‘energy and other component’ of household bills increased by 4.5% in the last quarter. This was offset by an 8.3% in the lines charge components for an overall reduction of 0.5% in residential bills.

Peters said the MBIE data shows retail prices were 30.68 cents/kWH on 15 May 2020, down only half a percent from 30.84 c/kWh three months earlier. A breakdown of the aggregate number shows that network charges fell 8.3% over the same period, to 11.09cents/kWh from 12.09 c/kWh. Meanwhile the “energy and other components” increased 4.5% to 19.59c/kWh, from 18.75c/kWh

“This appears to show that retailers have absorbed the $280m in annual network charge reductions or, more likely, they are paying greater amounts to generators. Either way, the customer is seeing little or no savings,” Peters said.

The Authority wrote to retailers on April 22, saying it had “heard and understood interest from network companies regarding whether (and to what extent) the network charge adjustments which took effect on 1 April 2020 passed through into the retail electricity market. As part of our ongoing market monitoring it is our intention to commence a review in October 2020 of how these network pricing changes affected retail pricing.”

Peters said the EA did not need to wait until October to begin a review as the evidence was already available from MBIE.

“ENA members expect that network charge reductions would be passed to consumers, and were repeatedly assured by retailers that that would be the case. But the data doesn’t lie.

“ENA is not alone in expecting prices to fall. The Commerce Commission said in November, when it cut the allowable revenues of Transpower and most distributors, that consumers should share in the benefits of a lower cost of capital through lower prices.”

First published in Energy and Environment on June 2, 2020.

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