31 Mar 2021

Otago electrity line charges to increase over 60 percent in five years

6:00 pm on 31 March 2021

Electricity line charges are set to climb over 60 percent in some parts of Otago in the next five years.

Electricity pylon.

Electricity pylon. Photo: AFP

That's after the Commerce Commission gave Aurora Energy the go ahead to spend $563 million to fix and run its network over that time.

The network is in desperate need of upgrades after years of underinvestment left it in a precarious state.

Aurora's network supplies electricity to more than 90,000 consumers in Dunedin, Queenstown Lakes and Central Otago.

It was fined almost $5 million last year after excessive outages between 2016 and 2019, but the company hoped $327 million of improvements would provide a safe and more reliable network.

However, some felt left out in the cold over how the company would cover that cost.

Central Otago and Wānaka residents would face increases to line charges of between $380 and $875 a year by 2026, while in Dunedin - where residents already paid less - it would only rise by between $270 and $540, according to the commission's estimates.

Central Otago's Mayor, Tim Cadogan, said he had been fighting for a more equitable spread of the cost of repairing and improving the network, but today's announcement came as no surprise.

"In some ways this is coming to the end of a long battle that we were always at high risk of losing," he said.

"We're not as badly off as we would've been if Aurora's original proposal had've got through, but that's probably pretty cold comfort considering how much the increases are. But we need a network that works."

After the Electricity Authority backed Aurora's approach it was "fait accompli" that Central Otago would be faced with larger hikes, he said.

The council would also have to work through what it meant for its operations as a large consumer of power in the district.

But, as last winter showed, there was little point in having lower power prices if there was no power.

"The town I live in, Clyde, on the coldest June day that we've had in just about forever - minus 10 degrees - the power went out because the network's not up to scratch. I visited elderly people that day who didn't have fireplaces and they were in dire straits. We were at the point of starting to talk about a civil defence emergency because we were going to have to get people out if the power didn't come back on," he said.

A reliable network also brought economic benefits for the district as it made it more attractive to business, Cadogan said, though he acknowledged it was cold comfort for those facing price hikes.

Grey Power Central Otago secretary Margaret Lorenz said the price increases meant some elderly residents on fixed incomes would face the choice between leaving the heating off over winter or not being able to pay the bills.

"The older ones are going to be affected the most because a lot of them don't have big nest eggs and they rely on their super and very little else. Even now it gets to be a choice about paying bills or eating - it is quite serious for some of them," she said.

Aurora chief executive Richard Fletcher said he was pleased the commission had listened to Aurora's pleas to increase their spending from the $523 million allowed under the commission's draft decision.

"We've been heard and the decision confirms that the credibility of the investment set out in our CPP (customied price-quality path) is robust. This is a reflection of the work our teams at Aurora have put in over the last few years and this decision allows us to now deliver on the commitments we have made to our consumer," he said.

It was still more than $45 million less than what Aurora had proposed, though Fletcher said he stood by what they had originally outlined.

The company was still working through what the commission's changes to the company's original proposal would mean for delivering improvements to the network - but it would not change their approach to safety.

"Safety will not be compromised. We'll have to look at the details around the reliability, but safety will not be compromised through this plan," Fletcher said.

"We do have, we recognise that, we have some work to do to restore the reputation of Aurora and the only way we'll do that is through delivering a safe and reliable network for our customers."

He understood the company had made mistakes in the past and it would work to better keep its consumers in the loop, he said.

"We continue to think, and the Electricity Authority confirmed this, that the way we allocate [pricing] across the three regions is appropriate. What we have committed to do is to engage further with communities on how those revenues get allocated across those three regions and that's something we'll be doing in detail in October."

Commerce Commission associate commissioner John Crawford said the region deserved a reliable and safe power supply.

"No one wants to live or work in an area where the power supply is unsafe and unreliable, and everyone agrees that the network needs to be fixed and I think what we've done is provide the funding to ensure consumers get the reliable and safe network that they deserve and that's in their best long-term interests to have that network at that state."

The commission was now taking feedback on proposals to improve public transparency of Aurora's operations.

Cadogan said he would be fighting to ensure Aurora was open and honest in how it delivered on its plans over the next five years, and he called for the Commerce Commission to be there to help locals understand the process.

"We need the commission to be a watchdog and not asleep in its kennel, but right on the end of its leash making sure that Aurora does what it's been allowed to do under this decision today."

Submissions on the commission's latest proposals close on 10 May.

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