Contact: Ralph Matthes, (04) 385 2945
Statistics Show Consumers Paid 8% More For Electricity Line Company Charges
“Electricity line monopoly charges rose 8% between the year ending 30 March 1999 and 30 March 2000 according to
statistics just released by the Ministry of Economic Development” noted Ralph Matthes, Executive Director of the Major
Electricity Users’ Group (MEUG). The statistics were released on Wednesday by the Ministry in their publication “New
Zealand Energy Data File, January 2001.” Line monopoly charges refers to the sum of Transpower’s transmission charges
and distribution charges by the 28 local Distribution companies.
“In 1998/99 total monopoly line charges paid by consumers were $1.299 billion . In 1999/00 charges were $1.402 billion.
Consumers therefore paid an additional $103 million to the line monopolies. MEUG and others have consistently argued
that the electricity line monopolies are out of control because they can unilaterally increase prices – the Ministry’s
statistics confirm this is indeed the case.
“The Ministerial Inquiry into the Electricity Industry last year recommended in essence a continuation of the extremely
light handed regulatory framework we currently have. MEUG and others wanted a more reasonable level of regulation to
ensure line monopolies had strong incentives to be efficient, that consumers benefited from efficiency gains and to
mitigate against line charges continuing to be spiral upwards at the discretion of those companies. Unfortunately the
Inquiry did not have the benefit of the statistics just released, otherwise they too may have more clearly recognised
the problem consumers have with their monopoly line suppliers – a problem that cost consumers $103 million last year in
increased charges.
“The Inquiry’s recommendations regarding line monopolies have now been translated into the Electricity Industry Bill
before Parliament. We believe re-consideration of the weak regulatory framework for lines companies contained in the
Electricity Industry Bill must be reviewed in light of these latest statistics from the Ministry.
“The Electricity Industry Bill prescribes that the Commerce Commission must use targeted price control should line
monopolies breach pre-defined thresholds. Nowhere in the world is this type of regulation used and indeed nobody in New
Zealand can explain how it is to be implemented. MEUG and others believe that the Commerce Commission should be directed
to consider all forms of price control. In particular it is not apparent why the Bill does not require the Commerce
Commission to at least consider incentive regulation as practiced and well proven in almost all of the OECD (ie CPI-X
type regulation). In effect the Bill in choosing an undefined and unproven “targeted price control” option is taking a
very large gamble. Consumers do not want to take that gamble, instead we want the Commission to consider all options
including universal incentive regulation based on CPI-X.
“There are three other points worth noting. First, Transpower have consistently claimed their charges have been
decreasing. If Transpower is correct, then on average distribution line charges must have increased by over 8% between
1998/99 and 1999/00.
“Second, the widely reported claims by Cap Gemini Ernst & Young in their report “New Zealand Electricity Distribution Company Analysis – 2000 Information Disclosure that average
distribution charges reduced appears to be entirely contradictory to the Ministry’s report.
“Third, in aggregate energy costs paid by consumers, that is for the cost of generation and retailer costs including
margins, actually decreased. While for different classes of consumers energy related charges may have varied widely, the
statistics clearly show that monopoly charges are out of control, not energy charges.
“Consumers have long held the view that they are not getting a fair deal from their line monopoly suppliers. The latest
statistics showing line revenues increased by 8%, or $103 million last year, confirms that belief,” concluded Mr
Matthes.