The Commerce Commission’s final decision on Aurora Energy’s proposal to increase electricity line charges across Otago “substantially reduces” the amount the company can recover from customers.

In June 2020, Aurora applied for a customised price-quality path (CPP) in which it forecast it would need $609M over five years to replace failing infrastructure and operate its network.

The Commerce Commission’s decision, released yesterday (March 31), shows electricity line charges will increase at a lower rate than requested and they will increase gradually.

In Wanaka and Hāwea, average monthly line charges (distribution and transmissions costs only) are due to increase by $9.40 in 2021/2022; $17.50 in 2022/2023; $27.50 in 2023/2024; $39.10 in 2024/2025; and $51.30 in 2025/2026.

Aurora Energy’s proposal would have meant an increase to the total monthly bill of average users in 2023/2024, for instance, of $47.30. Under the new charges that bill is only $31.50 - a saving of almost $16 per month on average for that year.

Aurora CEO Richard Fletcher said the decision provided certainty.

Commerce Commission communications advisor Rebecca Lowe noted however that it is difficult to provide long-term estimates of line charge increases “as there are a number of factors that impact future prices, including any changes Aurora may make to its regional pricing mechanism”.

Aurora Energy indicated earlier this year it would change its regional pricing so the costs of providing electricity supply are allocated more fairly; this would lead to a modest reduction in the share of operating costs paid by customers in Central Otago and Queenstown. 

The Commerce Commission said in its report it supports “any moves by Aurora to make its pricing more cost reflective”. 

Among the suite of measures announced yesterday, the Commerce Commission has also capped Aurora’s annual revenue increases to approximately 10 per cent; allowed the company to recover $563M over five years (almost $50M less than requested); and it has also set minimum standards for power outages and interruptions in the network so reliability will stabilise and improve.

“Taken together, the package of measures we have released is focused on the long-term benefits to consumers. Aurora must now deliver on its proposal,” associate commissioner John Crawford said.

He acknowledged the impact the line increases would have on households, “particularly when we are entering winter when energy requirements increase”. 

“While this decision substantially reduces the increase in line charges compared to Aurora’s proposal, we are conscious that the impact on electricity bills will still be significant.”

But without the investment, Aurora’s network would continue to deteriorate, safety incidents would increase, and its customers will experience more frequent and longer outages, he said.

Aurora CEO Richard Fletcher said he greeted the Commerce Commission’s decision cautiously but said it provided certainty.

“The final CPP decision now means we can get on and deliver our plan that has been well thought through, and will allow us to deliver our services to consumers safely and efficiently,” he said. 

In March, Aurora Energy announced its prices for the current year and consumers should now have been notified by their chosen power retailer of their prices, he said.

“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 addition to its decision on the CPP, the Commerce Commission yesterday released for consultation its draft decision on additional reporting measures that are designed to improve the ability of customers to hold Aurora to account. 

The reporting measures 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. 

Consultation will open on the draft decision on May 10.

PHOTOS: Supplied