$214m coming off power bills

Consumers are being advised to think twice before locking themselves into long-term electricity contracts, ahead of price cuts that should kick in from April.

Electricity bills should fall in most parts of the country as a result of two Commerce Commission rulings that will reduce the revenues lines companies and national-grid operator Transpower can earn from their networks.

Consumers should benefit to the tune of $72 million per year as a result of the regulator’s ruling on lines companies yesterday.

Those savings come on top of a previously-announced $142m drop in Transpower’s annual fees, which are also regulated by the commission and which lines companies pass through in their bills. Taking into account both changes, the price Vector will charge consumers in Auckland will fall by $4 a month from April, while Orion’s prices in Christchurch will fall by $3 a month, according to the commission.

In some regions the price changes will be far greater, with Centralines in Hawke’s Bay and Kerikeri-based Top Energy both required to reduce their bills by

$34 a month.

Lines company costs make up

27 per cent of an average residential consumer’s monthly bill, with Transpower’s charges chipping in another 11 per cent.

The only lines company that will be allowed to raise prices is Aurora Energy which supplies

90,000 customers in and around Dunedin, where monthly bills should rise by $1 a month.

The savings estimates provided by the Commerce Commission assume customers are on low-usage tariffs aimed at households that consume less than 8000 kilowatt-hours per year, a commission spokeswoman said.

It was difficult to estimate the size of the price drops that the minority of consumers on highusage plans would see, because of the large variability of high-use tariffs, she said. Wellington, where lines company Wellington Electricity is currently managed under a slightly different regulatory regime, is one of several regions where lines companies’ own charges will remain unchanged for now. But all consumers should benefit from the drop in Transpower’s transmission charges.

Graeme Peters, chief executive of the Electricity Networks Association, which represents the country’s 27 local lines companies, noted that after adding in the 15 per cent drop in Transpower’s charges, electricity users should be $214m per year better off overall.

‘‘With reductions on the way, consumers should be careful about locking themselves in to fixed-term contracts which extend out for a year or 18 months, as they could miss these substantial network reductions in April,’’ he said.

The 15 lines companies impacted by the commission’s ruling will need to decrease their collective annual revenues by 6.7 per cent to $1.01 billion next year.

Commerce Commission deputy chairman Sue Begg said that decision struck a balance between minimising costs for consumers and ensuring lines companies had incentives to invest in their networks.

‘‘For most customers, this reset will result in an initial reduction in distribution charges in April next year.

‘‘This reduction is largely due to lines companies having access to cheaper finance due to low interest rates,’’ she said.

Vector chief executive Simon Mackenzie said that while it would be lowering its prices from April as required, it would be entirely up to electricity retailers to determine whether the savings would be passed on to customers.

‘‘It is our expectation that the Commerce Commission and Electricity Authority will take steps to ensure this happens,’’ he said.

After the price drop next year, local lines company charges will then increase in line with inflation over the four years between 2021 and 2025, before the next ‘‘reset’’.

Begg said the new ‘‘pricequality paths’’ would still allow lines companies to increase their investment in their networks.