United lines pockets with power rebate

By CHRIS DANIELS energy writer

High wholesale power prices and low hydro-lake levels have slashed company bottom lines across New Zealand.

But the dry, cold winter also means that local monopoly power lines companies are getting a bigger cheque from Transpower each month.

The money comes from "transmission rentals" or rental rebates, created from surpluses in electricity trading between the generators and the retailers. The higher the electricity price, the higher the rebate.

Some lines companies, including Vector and Orion, pass the money straight on to electricity retailers, but the country's biggest - UnitedNetworks - pockets it.

United, the monopoly lines company for the the west and north of Auckland, the Bay of Plenty, Coromandel, part of the central North Island and Wellington, said it was not profiteering from the power crisis.

It said the Government-sponsored electricity saving campaign, of which it was a part, meant less income.

Rob Jamieson, spokesman for Canterbury lines company Orion, said the company passed on rebates to the electricity retailers.

He said the money - usually between $8 million and $10 million a year - had not been earned by Orion, which acted only as the transporter of the power bought by retailers.

The second largest lines company, Powerco, said it would not make any extra money from the low lake levels.

Chief executive Steven Boulton said the rebates "were worked into the prices" charged to retailers.

These rebates were not windfall profits and when weighed against the drop in revenue caused by electricity savings would have a neutral effect on earnings.





They derived from inefficiencies in the transmission network, which meant retailers did not get all the power they paid for.

Once electricity deals were settled, state-owned grid operator Transpower issued a rebate to make up for the transmission anomalies.

However, because Transpower had no contractual relationship with retailers, it paid the rebate to lines companies and generators.

This gave lines companies discretion over how to deal with the cash.

United and other lines companies have been working to promote power saving, despite this leading to a drop in earnings.

United's pricing manager John van Brink said Wellington was making electricity savings of up to 8 per cent.

Such savings cost United about $2 to $3 for every $100 power bill.

Recent power saving meant Vector, the publicly owned lines company for Auckland City, Manukau City and Papakura, was also losing income, said chief executive Patrick Strange.

He expected a $1 million to $2 million drop in earnings.