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Benefits Of Incentive Regulatory Regime

Victorian Regulator Shows The Path New Zealand Consumers Want For Incentive Regulation On Electricity Line Monopolies

“Yesterday’s announcements by the Office of the Regulator-General in Victoria that line companies must reduce average distribution charges by between 12 and 22 per cent from 1 January 2001 clearly demonstrates the benefits of an incentive regulatory regime”, said the Executive Director of the Major Electricity Users Group Ralph Matthes .

“The Victorian incentive regulatory regime, frequently termed CPI-X, is delivering a win-win to consumers and the economy by lowering prices and creating real incentives on line companies to become efficient. And this is not at the expense of quality, as the Victorian regulator’s decision also requires distributors to improve the reliability of supply by up to 37 per cent over the period 2001-05.”

“If distribution charges were to reduce by between 12 and 22 per cent in New Zealand, then the average household would save between $36 to $66 per annum . In Victoria the regulator estimated the reductions announced yesterday would save an average family up to $65 on its electricity bill in 2001. These savings are clearly a benefit to consumers.

“With incentive regulation there would be a real driver to realise the estimated $70 million per annum of possible efficiency gains from the distribution sector as calculated by Ernst & Young earlier this year . This is clearly a benefit to the economy.

“Households and business want reliable and secure electricity infrastructure services at a reasonable price. The current regulatory regime in New Zealand provides line company owners an opportunity to capture the benefits of the reforms to date and in some cases to seek rates of return, in our view, in excess of the very low risk those businesses face. The Victorian CPI-X or incentive regulatory regime demonstrates what is achievable and we strongly encourage the Government to implement a similar regulatory regime in New Zealand” concluded Mr Matthes.


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