Commission requested to review basis for monopolies' cost

Commerce Commission requested to urgently review basis for monopolies' cost of capital

The High Court has identified an error in how Transpower and other monopoly suppliers calculate their cost of capital which may be costing power consumers $150 million a year in excessive profits.

As a result the Employers and Manufacturers Association together with the Major Electricity Users Group (MEUG) and the Consumers Institute have written to the Commerce Commission requesting an urgent review of how the cost of capital for monopolies such as Transpower is calculated.

"We need the issue to be reviewed with urgency because in 2015 a regulation about to be triggered would allow power transmission costs to remain as they are until 2020," said Kim Campbell, EMA's chief executive.

"If that were to happen, New Zealand power users could end up paying about $1billion more than they should over the next few years.

"Smaller businesses in particular need to be confident that the power transmission charges they pay reflect the real costs without anything hidden.

"The Commerce Commission has the power to investigate the error identified by the High Court and to make sure it does not keep on being repeated.

"In its decision the High Court expressed the view that the Commerce Commission should review the 'Cost of Capital Input Methodology" but stopped short of requiring this of the Commission. Hence our letter to the Commission seeking the review.

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