Transpower cost-cutting could trim power bills

By RICHARD BRADDELL

Lower grid charges from Transpower could cut power bills by around 1 per cent.

But that will depend on customers' lines companies and energy retailers.

Transpower said yesterday that it would cut transmission charges by an average 14 per cent from April 1 next year.

That would reduce transmission costs by $66.5 million.

Transpower says transmission costs make up about 12 per cent of consumers' monthly power bills.

But the overall impact on consumers is likely to vary, because of regional variations and the different policies of lines companies and electricity retailers.

Urban areas such as Auckland are likely to get the full benefit of the 14 per cent reduction.

For a family of four, this could mean a saving of up to $140 a year on the power bill.

But Transpower's general manager of marketing, Bill Heaps, said a small number of customers would face price increases.

These would occur because the lines companies and, to a lesser degree, generators who connect to the national grid, have come off long-term contracts and would have to pay the full cost of transmission for the first time.

But the impact is further complicated by the lines companies' relationships with consumers and energy retailers.

The chief executive of Auckland lines company Vector, Patrick Strange, said customers should get some benefit from the Transpower reduction.

Vector has a "conveyance" agreement - a direct contractual relationship - with consumers. Others charge the retailer which collects from consumers.

Retailers often use their role to adjust the lines or "daily charge," depending on the customer.

A smaller variable charge is more attractive to large consumers while the opposite is true for small users.

Mr Heaps said the lines companies would be under pressure to pass on Transpower's lower charges because of the Government's focus on ensuring their profits are not excessive.

Transpower saved $22 million through efficiency gains.

The other $46.5 million relates to charges in excess of Transpower's required rate of return in previous years.

Mr Heaps said a large component of the price reduction reflected revaluation of Transpower's network to the costs a new entrant would face if it built competing infrastructure.

Because technology had improved and infrastructure such as transformers cost less, Transpower's network was effectively worth less, he said.