Transpower refutes watchdog claims

State-owned energy network company Transpower today launched a rebuttal against Commerce Commission claims it has overcharged consumers.

The competition watchdog this month accused Transpower of breaching payment thresholds by $50 million and threatened to impose price controls or take over the national grid operator.

Transpower today released its submission to the commission, quoting the views of seven independent individuals and organisations with expertise in regulatory and economic issues.

The submission argued that the Commerce Commission could not be "reasonably satisfied" that Transpower's behaviour warranted control, or that there were long term benefits from that control.

"Transpower has done nothing wrong," chief executive Ralph Craven said.

"It is true that Transpower has self-reported breaches of the Commerce Commission's price path threshold. However, the threshold is intended to act as a screening mechanism -- a breach is not by itself any indication of wrongdoing.

"Transpower firmly believes that it has acted as a reasonable and prudent grid owner and operator, and that its revenue requirements are fully justified."

Mr Craven said Transpower had not earned "excessive" profits.

"We are not attempting to pre-fund unapproved projects and we are not expecting today's generation to pay for benefits that will only accrue to future generations. None of these allegations has any substance."

Mr Craven said the commission's analysis was founded on misunderstandings about the way Transpower set its prices and the way investment decisions were made.

The key points of Transpower's submission were:

* The price increases which caused Transpower to breach the thresholds reflected necessary and efficient increases in expenditure from historically low levels;

* Thresholds provided a screening mechanism and were never intended as a form of control;

* A breach of the thresholds was not indicative of excess profits;

* The suggested benefits of control were overstated;

* Capital expenditure associated with major grid upgrades would only be recovered where there was Electricity Commission approval for such projects;

* While Transpower has sought to progress aspects of the North Island 400 kV project, it has done so with the concurrence of the Minister of Energy and the Electricity Commission;

* Intervention by the Commerce Commission was likely to further confuse the regulatory arrangements governing transmission;

* Transpower's credit rating could suffer further and cost of debt would rise, leading to higher prices for customers.

This month, global ratings agencies Standard & Poor's and Fitch warned the commission's "big stick" approach could lower Transpower's investment grade.

S&P downgraded its outlook on the national grid operator from stable to negative, while Fitch said that, from a credit perspective, the stand-off between Transpower and the regulators was "prolonging concerns for the New Zealand electricity sector".

Submissions on the matter closed yesterday and the commission will decide at the end of next month whether to proceed with a takeover.

- NZPA