Christchurch gets a rebate of $360,000

By Mark Reynolds

Christchurch City Council is being paid an electricity "rebate" of $10,000 a month under a deal it cobbled together just before it sold retail electricity company SouthPower last year.

The rebate is on top of lower energy prices the council negotiated with the power retailer it owned at the time. The arrangement was yesterday described by junior Government whip and Christchurch's Ilam constituency representative Gerry Brownlee as a "sweetheart deal".

Christchurch City Council inventory manager Merv Altments said the rebate arrangement was simply a way of recovering the costs of having a collective electricity contract. He said: "It is not unusual. It is the same way the Government supply office works. Effectively you pay for the contract through a rebate. Within a council organisation we have to re-allocate our costs across significant activities. The [council-owned operating] units themselves pay the [electricity] price that incorporates this rebate."

The rebate was first paid last August and will be paid for every month of the three-year electricity purchase agreement the council negotiated, or a total of $360,000.

The Christchurch City Council owned 87 per cent of SouthPower but sold its retail power operations to TransAlta late last year. The electricity supply agreement was agreed in principle last August, but was still being finalised when SouthPower was sold in November.

"It's up to [TransAlta] to decide how much of that [rebate] they would want to recover and how much of that they would say, 'well, this is something we feel is a benefit to the council that we would give them to get a better price'," Mr Altments said.

Power retailing companies like TransAlta, Contact Energy and TrustPower had to acknowledge the agreement with the council was a confirmed business contract when they were bidding for the SouthPower assets. Christchurch City Council still owns the former network operations of SouthPower, which have since been renamed Orion. The agreement means the council is largely immune from the power price rises that most of its ratepayers now face, in part because of changes to the way Orion charges for its services.

Mr Brownlee said: "While electricity reform enables and encourages big users to make constant supply arrangements, it is irksome that the council as a big user has put together its own sweetheart deal while demanding as a lines company shareholder greater returns which have caused a price increase for the very people who own the lines company - Christchurch electricity consumers. I am left to conclude that the city council has little interest in assisting consumers to get a better deal, preferring instead to see increased power prices, effectively subsidising the rate increase through particularly high return demanded from the city's line company, Orion."

The agreement covers the council's purchase of power for street lighting, traffic lights, water supply, civic buildings and council wastewater and water treatment facilities.