Aurora sets out plan for power bill hikes

Some Otago households will pay up to $360 more for their power in the coming years if an Aurora Energy pricing proposal is approved.

The company has sent to the Commerce Commission its proposal to lift prices across its three networks to help pay for the company’s infrastructure.

Aurora had told the public it was considering charging a higher price but after customer feedback for "no frills", safety-focused improvements to its networks and Covid-19 reducing population forecasts, it came down to what it is today proposing.

Under this proposal households in Dunedin would face an average increase of $288 over three years from next year until 2024.

The increase was highest for Central Otago and Wanaka at $360 over the three years, while for Queenstown it would lift prices by $240.

The different prices Aurora can charge over its three networks is regulated by the Electricity Authority.

The overall revenue it can bring in is decided by the Commerce Commission.

To bring household costs down the company cut its intended spend on infrastructure from $404million to $383million.

"We’ve ... listened to customers and they’ve said ‘don’t put any frills in’," Aurora chief executive Dr Richard Fletcher said.

"We’ve presented options in that [consultation] paper — some enhancement options — they didn’t want any of that. We’ve taken that out."

He said the plan was "a purely safety and renewal-driven plan".

"The plan that we are proposing now ... is firmly based on delivering a safe network. That’s its primary focus. We’re not looking at increasing its level of reliability.

"What we will do with this level of spend is stabilise ... the deterioration in reliability we’ve been seeing over the last few years.

"But we’re not looking at a big step change in improvement."

An independent review of its plan also helped reduce the $404million proposed spend.

Aurora would keep some investments such as an asset management plan, which Dr Fletcher said would help the company "make better informed decisions in the future".

Covid-19 struck during the time Aurora was deciding on its prices and that meant it had to change its population forecasts for places like Queenstown.

"Where the investment is being driven by new connections and growth ... we’ve re-looked at our investments and in a number of areas we’ve deferred investments," Dr Fletcher said.

The chief executive said the company elected to ask for a three-year price from the Commerce Commission, despite being able to get five years.

"We expect we’ll be under scrutiny for up to 10 more years," he said.

The company had had up to 25 years of under-investment and "we’re not going to catch that up in three years".

That meant Aurora would have to continue at an "elevated level of spend" for a decade.

Central Otago Mayor Tim Cadogan said residents now had to convince the Commerce Commission if they needed lower prices.

"The matter’s now out of Aurora’s hands and in the Commerce Commission’s hands.

"It’s incumbent upon anybody in Central Otago who’s going to be affected by these increases to engage with the Commerce Commission and let them know what that kind of an increase is going to mean to them as households or businesses," he said.

He accepted Aurora needed to spend to make its power poles and other infrastructure safer and that money had to come from customers.

"That obviously has to be rectified and unfortunately there’s only one place that money’s going to come from.

"Our trust has to be in the Commerce Commission getting their numbers right to do what needs to be done."

Dunedin and Queenstown mayors Aaron Hawkins and Jim Boult did not respond to requests for comment.

Dunedin City Holdings Ltd [DCHL] chairman Keith Cooper said there had been "much ill-informed commentary" about the dividends paid by Aurora to the Dunedin City Council, via DCHL.

"To be clear, had those dividends not been paid by Aurora, the company would still be applying to the Commerce Commission for the same CPP [customised price-quality path] applied for today.

"The revenue allowed under the CPP is what enables the company to invest the quantum of money on the network it is proposing. It is unrelated to the financial structure of the company."

He said prices for customers had been kept low in previous years because of under-investment in the network.

"The Commerce Commission will define the return Aurora Energy can make on the plan it has submitted today and this is unrelated to any historical dividend payments or the capital base of the company."

The Commerce Commission will carry out its own investigation into Aurora’s pricing before releasing a draft decision on November 12.

A final decision is expected on March 31 and the following day the decided pricing will begin.