22 Jul 2014

$10 power bill cut on the horizon

1:15 pm on 22 July 2014

A Commerce Commission draft decision lowering the amount gas and electricity lines companies can earn is an obstacle to investment, Vector says.

The commission has estimated allowing a lower return on assets for electricity and gas lines companies, such as Vector, would take about $10 a year off the average power bill.

Vector has about 550,000 customers, so that implies a $5.5 million a year reduction in Vector's profits.

The electricity and gas lines company said if the draft decision stood, it would reduce its investment returns and put further pressure on Vector's ability to invest in its network.

Vector chief executive Simon McKenzie said because current technology advances greatly increase the risk and uncertainty relating to any investment in networks, the corporate regulator should be increasing the allowable return on assets, not reducing it.

He warned that even if the corporate regulator stuck to its decision, there was no guarantee any reduction in lines charges would be passed on to customers.

"If this decision does go through, I think it's also important that to me there's a missing ingredient in the regulatory environment ... there is currently no mechanism that we see in the regulatory frameworks which ensure that that benefit does go through to customers," Mr McKenzie said.

"So we've long been on the point, having reduced our prices considerably over the last two years, to say that there needs to be a way in which the regulator - either the Commerce Commission or Ministry for Business, Innovation and Employment - have a mechanism to assure that this does actually get passed through to customers."