Line company rates under fire

By RICHARD BRADDELL

WELLINGTON - Electricity line companies should be constrained because they often charge two or three times what is justified by their network valuation, the electricity inquiry was told yesterday.

Fletcher Challenge executive Warwick Bosson said the electricity industry's "non-regulator" was allowing line companies to charge well in excess of their true optimised deprival value - a measure of their asset valuations - because they were exploiting the methodology to introduce inflated capitalisation costs.

Even the might of Fletcher Challenge had been unable to negotiate satisfactory line charges, although there had been "reasonable success" when it could mount a credible threat of building alternative infrastructure to bypass the incumbent network.

But even then, Fletcher Challenge was at a disadvantage because the line companies knew its investment time horizon was 10 or 12 years, compared with their 50-year investment time-frames.

Mr Bosson said the market could not be left entirely to light-handed regulation, and noted that, although there was information disclosure, nobody was putting it to any use because there was no compulsion to do anything about it.

Energy Minister Pete Hodgson last week threatened the line companies with prosecution because of poor and late compliance.

However, John Anderson, of Te Kuiti-based The Lines Company, said his company's delay in filing its information disclosures was due solely to the differences between the Auditor-General, who audits the trust-owned company's accounts, and the Ministry of Commerce, which sets requirements.

The Auditor-General had demanded changes to the disclosures before issuing an audit certificate, and the Ministry of Commerce had refused to accept them in the altered format, he said.

The ensuing fight between Government departments caused the delay.

Earlier, the chief executive of Hamilton-based line company WEL Energy, Mike Underhill, said electricity meters should have remained with the line companies, but were in most cases bought by the incumbent energy retailer.

Retailers have been accused of delaying meter readings ahead of customers' switching to another supplier, and Mr Underhill said the present situation was also impeding the introduction of new metering technologies.

In common with several other speakers, he thought the meters should be sold back to the line companies, or put in the hands of an independent administrator and meter reader.

However, Mr Underhill said there should be no compulsory return of the meters to the line companies, although they should buy them back on commercial terms of the kind already established during the energy-lines split.

He believed that would happen of its own accord as the line and energy companies bedded in their billing and call-centre systems.

Several submissions referred to quality of service, and how that would be dealt with in contracts.

Mr Bosson said the difficulty with electricity was that it was worth considerably more than its price. Had Mercury been called on to pay for all the consequential losses from the Auckland power cut, its assets would not have covered the cost.

He said a system of fines was required.