Minister supports commission's probe into Transpower prices

David Parker

Energy Minister David Parker said today he supports the Commerce Commission's investigation into State-owned transmission company Transpower.

Complaints from consumers about electricity prices, company profits and a lack of competition in the industry have prompted the commission's investigation into allegations of price-fixing.

The investigation comes after Transpower, which runs the national grid, announced its plan to increase transmission charges by 19 per cent from June 2006, and follow this with annual increases of up to 13 per cent a year for a further four years.

Commission chairwoman Paula Rebstock said Transpower would not be allowed to implement its increases unless the commission was satisfied they were justified.

Major Electricity Users Group executive director Ralph Matthes said the group believed there might be cases for investigating price-fixing, "in other words, prices above that which you would expect in a competitive market".

Mr Parker told National Radio today he agreed the regulator needed to be able to do its job and "properly investigate whether the prices that are proposed to be charged are fair".

The commission said it hoped to complete the investigation by the end of next year.

Transpower is subject to the regulation of electricity lines businesses under the Commerce Act, which is enforced by the Commerce Commission.

Currently, that regime allows Transpower to increase its prices annually by no more than the rate of inflation minus 1 per cent, unless the price increase is for investments that have been approved by the Electricity Commission.

If Transpower breached that threshold of performance the commission said it could, under certain circumstances, take steps to constrain the company's prices.

Ms Rebstock said the increase announced by Transpower was "clearly outside" the inflation minus 1 per cent threshold and was for investments that had not all been scrutinised by either the Electricity Commission or the Commerce Commission.

The Commerce Commission is investigating previous breaches of the threshold by Transpower, which Ms Rebstock said the company had not sufficiently justified.

These price rises, in April 2004, resulted in Transpower collecting $111 million more in revenue for the two years to June 2005 than regulations allow.

The 19 per cent increase, announced on Friday, looks like overcharging consumers by about $85m under price thresholds set for Transpower by electricity regulations.

Transpower wants to increase its revenues by 75 per cent from $509m now to $900m in five years. It says it needs this magnitude of increase to cover the cost of upgrading the grid.

Transpower's transmission charges are paid by electricity generators, retailers and lines companies, which pass them on to consumers. They make up about 10 per cent of a power bill.

Transpower plans to fight any moves by the Commerce Commission and Mr Parker was questioned today on what he thought of the State-owned transmission company spending taxpayer money to hire lawyers to fight government regulator the Commerce Commission.

Mr Parker said the amount of money that would be spent in the "spat" was "absolutely minuscule" compared with the amount at issue for consumers if Transpower was allowed to overcharge.

"I am going to protect the Commerce Commission as it goes about its job to properly look at whether Transpower are overcharging."

Mr Parker also said there was a discussion document circulating considering the question of transferring the Commerce Commission's control functions to the Electricity Commission.

Decisions were expected next year.

However, Mr Parker said he was not necessarily convinced this should happen.

- NZPA