18 Aug 2017

Power upgrade costs to be passed to customers

4:34 pm on 18 August 2017

A massive upgrade of electricity wires, poles and transformers across wide areas of the North Island could add $3 to $4 per month to average consumers' power bills.

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Photo: 123rf

The estimate is in a paper by the Commerce Commission on an application by New Zealand's second largest lines company, Powerco, to raise prices.

Powerco needs the money to pay for $1.32 billion of new electrical equipment - down from an earlier estimate of $1.4 billion.

It wants to pass that cost on to customers at a forecast extra $3 to $4 per month for an average power bill.

The affected areas include parts of Waikato, Bay of Plenty, Taranaki, Wairarapa and elsewhere.

The company announced earlier this year it needed the money to replace over 27,000 power poles and cross arms and 1600km of overhead lines, many built more than half a century ago.

Information provided by the company and published by the Commission said 50.5 percent of Powerco's substation transformers and 36.3 percent of substation switching gear were past their life expectancy.

As a natural monopoly, without market competition, Powerco needs Commerce Commission approval to raise its prices.

The Commission has now sought responses from the public. It added peer review already approved most of Powerco's arguments.

The need for upgraded equipment was highlighted in reports that showed many lines companies right across New Zealand had outdated cables, transformers and switching gear.

Powerco is the first company to seek more money to fix the problem and Dunedin firm Aurora Energy will be the next.

That company was stung by accusations last year of rotting power poles.

Aurora Energy's application to the Commission will seek a total of $720.6m over ten years for asset upgrades. This compares with a previous figure of $417m.

Electricity analysts attribute the problem to heavy investment in the 1960s and insufficient work since then.

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