Watchdog to bite Unison

The Commerce Commission has accused Hawkes Bay-based power lines company Unison of overcharging consumers in Taupo and Rotorua.

The commission yesterday published its intent to declare control of Unison.

The move means that - after a final submission process - it will impose price controls on the company.

The commission says consumers in Rotorua and Taupo could be better off by $193 and $321 a year, respectively, if it assumes control.

Hawkes Bay consumers, who are beneficiaries of the trust which owns Unison, would be better off by about $77.

Last month, the commission used similar powers to impose price controls on the gas-pipeline business of energy network companies Vector and Powerco.

This will be the first time it has assumed control of an electricity network.

The commission said Unison breached the legal thresholds for distribution, with price rises in April 2002 and March 2004.

Unison chief executive Ken Sutherland yesterday acknowledged the commission's price thresholds had been breached but denied it was overcharging customers.

He said Unison had a challenge of the commission's regulatory regime lodged with the courts.

Unison's charges had been unsustainably low and price increases had simply moved them to a commercially viable level, which was needed to maintain the network.

After an initial inquiry, the commission assessed that Unison's average rate of return could be as high as 12.23 per cent - compared with required rates of return of 7.35 per cent.

It also found that, by region, Unison's estimated rate of return was 17.35 per cent in Taupo, 14.36 per cent in Rotorua and 8.25 per cent in Hawkes Bay.

"The profits earned from Unison's Rotorua and Taupo consumers, who are not beneficiaries of the trust, are significantly higher than those taken in Hawkes Bay, who own the trust," said commission chairwoman Paula Rebstock.

Unison is 100 per cent owned by the Hawkes Bay Consumers Trust which acts on behalf of consumers connected to Unison's network in Hawkes Bay.

Rebstock said although consumers in Rotorua and Taupo would be likely to benefit most from any price controls, there were also likely to be some benefits for Hawkes Bay customers.

By publishing its intent to take control, the commission effectively gives Unison one last chance to prove its case before price controls are imposed.

The process will now be opened up to public submissions and a conference on the issue - at this stage scheduled for November - will be held.

Last month, Unison sought a High Court injunction to prevent the commission from publishing its intent to declare control. That injunction was dismissed.