A 2003 rebate would have been $10

Matt Todd

Opinion

Re: How break-even network cuts $10m-$12m, February 1 letter.

Eastland Group, which owns 100 percent of Eastland Network, is a profitable business because that is one of the primary objectives its shareholder Eastland Community Trust tasks it with. We make a profit, use some of this to pay a dividend to ECT and reinvest some of it to grow profits and future dividends. This has been a particularly successful strategy.

As a community-owned organisation we are proud that we have grown a capital base, provide efficient, essential infrastructure, create jobs, help stimulate the local economy and have continued to increase our distributions to ECT so they can fund some wonderful and much-needed projects within our community.

One of our responsibilities is keeping the lights on for the region; this includes ongoing maintenance and upgrading of the network, with $50.5 million capital investment planned over the next five years.

In the 2002 financial year Eastland Network, which was then the only asset, was not able to pay a dividend. In 2003 it paid $250,000 to ECT. Not the sort of numbers that can make much of a difference. If this had been paid as a rebate it would have amounted to $10 per consumer for the year.

In 2018 Eastland Group is forecast to pay distributions of $10 million to ECT, enough to make a real and positive impact in the community.

Only a part of this distribution is now coming from Eastland Network, with the other businesses, such as the port, increasingly contributing.

The line charge component of a consumer’s bill in Tairawhiti is high because we have a lot of asset (long lines) and not a lot of connections, but they are far from being the highest. If we back out the Transpower transmission costs, the average residential consumer is paying 11.03 cents per kilowatt hour in line charges — in 2007 they were paying 8.00c/kWh. Therefore in the past 10 years the distribution line charge component of a residential bill in Tairawhiti has gone up by 37.9 percent against a national average of 47.5 percent. We are improving relative to the rest of New Zealand. According to MBIE, which lists 42 locations, there are seven other network areas where the distribution price is higher than in Gisborne/Wairoa.

In May 2007 the average delivered cost of electricity (line charges and retail charges) to a residential customer in Tairawhiti was 23.9c/kWh. In May 2017 it was 33.9c/kWh, which is an increase of 42 percent over 10 years — way lower than some of the numbers that are being bandied about.

A few other points, where I think there is a lack of accuracy. Eastland Network is unable under regulation to differentiate its line prices between Gisborne and Wairoa customers. The IRD is currently looking at electricity networks that discount line charges and is suggesting that these discounts should in fact be taxed. Eastland Network has historically had debt. In 2002 when the network was the only asset it had $28.45 million of bank debt, representing 34.2 percent of total assets.