CPP is a slap in the face

The decision by the Commerce Commission to approve the application by PowerCo for a Customised Price Path (CPP) is no surprise, but is a slap in the face for the ordinary customer.

Despite submissions by Grey Power, the Major Energy Users Group and industry experts that the draft determination was flawed, the Commerce Commission’s final decision has no material changes reflecting the concerns raised.

Grey Power’s submission acknowledged that the expenditure sought was necessary but queried the practice of increasing costs to consumers to cover this and then using the value of the improved assets to determine the allowed rate of return in future years. In their final decision the Commission acknowledge the impact of this saying: ‘In the years following the CPP period, we expect the capex investment will place continued upwards pressure on prices as the full value of the investments enters the regulatory asset base. … We estimate the impact on the average monthly residential consumer’s bill to be around $2.70 within the CPP period’ and ‘an additional average price increase in the order of $6 in the subsequent regulatory period’

Grey power acknowledges the Commission’s recognition of these concerns and their commitment to ‘ look at the issue again when Powerco transitions from the CPP price path’ but note that their justification for the current pricing practice ignores the artificial value placed on the lines companies assets when they were appropriated from the public purse or that the CPP itself provides a mechanism for PowerCo to recover its costs from the consumer base.

Grey Power considers this practice of charging consumers on the basis of a revalued Regulatory Asset Base where the increase is a result of consumer funded improvements iniquitous and we will be raising the matter with The Minister as part of her wider review of the Electricity supply industry.

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