Commerce Commission makes decision on Aurora
Posted at 6:00am Thursday 08 Apr, 2021 | By Pat Deavoll firstname.lastname@example.org
Last Wednesday the Commerce Commission of New Zealand (CCNZ) published its decision on Aurora Energy's customised price-quality path (CPP); a decision which will reduce the amount the company can recover from its customers.
CCNZ decided to allow Aurora to recover $46 million less from its customers than it had asked for on a five-year CPP. This reduction was because it considered some of its expenditure could be deferred to a later date and some was not sufficiently justified to the level Aurora had sought.
Even so, Aurora would be able to significantly increase its expenditure to address the issues on its network and recover the cost from its customers.
To help mitigate the impact of increased bills CCNZ capped Aurora's annual revenue increases at a level of approximately 10 per cent per year.
Overall, CCNZ considered Aurora had made its case for a step up in investment in its network. Without a CPP, its network would continue to deteriorate, safety incidents would increase, and its customers would experience more, longer, outages, CCNZ said.
It also amended Aurora's quality standards for unplanned outages to better reflect the state of its network. This had not been set at the levels Aurora requested but would allow it to meet targets that reflected its performance over the past five years. Overall, this should see the reliability of supply stabilise at current levels before gradually improving over time.
Alongside CCNZ's decision on Aurora's CPP, it released a draft decision on additional reporting measures that were designed to improve the ability of customers to hold Aurora to account. These would require Aurora to publish a yearly report on its progress on delivering the investment plan, present this report to customers directly, and report more clearly on service quality and regional pricing issues.
Aurora Energy CE Richard Fletcher said: “The Commerce Commission decision means we can get on and deliver our plan that has been well thought through, and will allow us to provide services to consumers safely and efficiently. There was extensive consultation with communities on Aurora's CPP application.
“ We've been heard and the decision confirms that the credibility of the investment set out in our CPP 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 consumers,” he said.
“In March, Aurora announced its prices for the current year and consumers should now have been notified by their chosen power retailer of their prices. As a result of the final decision, we will not be readjusting our annual lines charges for the coming year which should provide some certainty to consumers.”
In June 2020, Aurora Energy applied to the Commerce Commission NZ for a customised price-quality path (CPP) so it could spend $383 million over the next 3 years (or $609 million over five years) to address safety and reliability issues on its network.
Aurora's application was significant and approximately double the allowances the CCNZ set Aurora for the previous comparable periods. Aurora said its investment plan was required to address historic under-investment in its network which had resulted in a gradual deterioration of its equipment including lines, poles and transformers.
In recent years this has resulted in a higher number of safety incidents and an increasing number of unplanned power cuts.
To pay for this, Aurora had forecast significant increases in power bills.
The CCNZ understood that now, more than ever, household incomes would be strained, especially in light of COVID-19. Many consumers would be struggling to pay their bills while needing a reliable electricity supply.
CCNZ's role in Aurora's investment plan was to set network reliability standards and determine how much money it should be allowed to recover from its customers to carry out its plan and over what period.
Read edition 1021 of the Wānaka Sun here.