NZCC releases draft decision on Aurora

Mayor Boult: I feel NZCC could be making the best of a bad situation on behalf of our communities.

Last Thursday the New Zealand Commerce Commission (NZCC) released its draft decision on Aurora’s proposed energy pricing increases for the Otago region, and Queenstown Lakes District Mayor Jim Boult said he was “cautiously optimistic.”

“I feel NZCC could be making the best of a bad situation on behalf of our communities,” he said.

In June 2020, Aurora Energy (Aurora) applied to the NZCC to spend $383 million over the next three years (or $609 million over five years) to address safety and reliability issues on its network.

Aurora’s application was significant and was approximately double the allowances the NZCC had set Aurora for the previous comparable periods.

To pay for this, Aurora had forecast significant increases to power bills.

“NZCC’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,” the draft plan said.

NZCC is now proposing to allow Aurora to recover $86m less from its customers than it had asked for in five years. This reduction was because it considered some of its expenditures could be deferred to a later date and some were not justified to the level Aurora had sought. Even so, Aurora would be able to significantly increase its expenditure and recover the cost from its customers. 

“Pushing the programme from three to five years and reducing the proposed spend by $86 million is mitigating but ultimately households in our district will still be looking at adding something like $3-$13 per month to the power bill, and this increases every year until by 2026 they will be paying $20-$73 per month. By 2026 some high-use customers in Central Otago and Wānaka would be charged more than $876 a year more than their current bills.For many that prospect will be inconceivable,” Boult said.

“Ultimately our community can think about how they use power and whether they can reduce their energy use (switching off, solar etc.) but we remain deeply concerned for those on fixed incomes contemplating using less or no heat during our winter period,” he said.

NZCC also proposed to amend Aurora’s quality standards for unplanned outages to reflect the state of its network better. This would not be set at the levels Aurora requested but would allow it to meet targets that reflected its performance over the past five years. Overall, that should see the reliability of supply gradually improving over time.

The CCNZ also recommended that $38 million of network investment already incurred by Aurora be included in what they now recover from consumers meaning Dunedin Holding Company Limited and its owner the Dunedin City Council (DCC) would fund it.  

“The NZCC understands that now, more than ever, household incomes will be strained, especially in light of COVID-19. Many consumers will be struggling to pay their bills while needing a reliable electricity supply,” the draft decision said.

“The position we continue to find ourselves in is firmly wedged between a rock and a hard place,” said Boult

“There is no easy solution. I hope that our communities will get informed about this issue and start to plan for it. I strongly recommend they do so if they haven’t already. Cost may be further mitigated, but ultimately power is poised to hit our communities in the pocket at a time when they can least afford it,” he said.

“Council will want to spend some time understanding the draft decision, and I urge our communities to engage at this point if they haven’t already as price increases will kick in from April next year.”

When the Sun contacted Aurora it said the Energy’s Board and Executive team would now take some time to work through the detail of the draft decision, which runs to some 500 pages, before making further comment.

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