Powerco plans new retail relationship

By CHRIS DANIELS

The often fractious relationship between electricity retailers and local lines companies is about to enter a new phase.

Steve Boulton, chief executive of Powerco, which is soon to become New Zealand's second largest lines company, says he wants to end the monopoly that the electricity retailers have over customers.

Powerco, based in New Plymouth, is the lines company for much of the central North Island.

Boulton said that prices charged by Powerco had fallen in real terms by 10 per cent in the past three years, but few retail customers knew this. Many had seen price rises of 10, 20 or 30 per cent in their power bills.

Retailers viewed the lines companies and their charges as costs that needed to be contained.

They did not pass on cost reductions to the consumers and had "a monopoly relationship" with them.

"Consumers have no idea. They are still confused," said Boulton.

Vector, the Auckland-based network that is about to take over UnitedNetworks and become New Zealand's largest powerlines company, has what is called a "conveyance" model, as opposed to an "interposed" arrangement, which Powerco has with power retailers.

In an interposed deal, the lines company has a contract with the electricity retailers only.

It has no contact with the actual customers, who receive their bill from the retailer.

This retailer is under no obligation to pass on cost cuts from the lines company, nor even break down the charges on the bill.

Vector chief executive Dr Patrick Strange said that he expected all New Zealand consumers to one day be covered by a lines company that had a conveyance arrangement with them.

Vector was the only lines company that had started its life with the conveyance arrangement.

"Basically, we aim to remove the middleman. Being close to the customer is to our own good."

The retailers were commodity traders, said Strange.

If there were six retailers in one street, all supplying different houses, then none of them had a vested interest in improving everyone's service.

Murray Jackson, chief executive of New Zealand's biggest retailer, the state-owned Genesis Energy, said he saw very little difference in the way Genesis dealt with Powerco from the way it worked with Vector.

Powerco, which said Genesis did not pass on savings to customers, had kept price reductions from national grid operator Transpower.

Jackson said that he favoured more transparency in power bills.

It should be made clear to customers how much money was going to the lines company and how much to the retailers.

Households wanted things to be simple, said Jackson, and he would ask Boulton about his ideas when he saw him on Monday.