The ENA has produced a helpful, plain-English guide on the best ways to manage electricity network issues in the context of the Resource Management Act.
The guide is targeted at RMA practitioners, local authorities and electricity distribution businesses.
Primarily, the guide identify appropriate RMA content that can be used to:
Feedback on the guide, developed by ENA members, is welcome, and it is intended that the guide will be submitted for approval as a best practice document on local government’s Quality Planning website.
Electricity tax decision will strip $24 million from provinces
The Electricity Networks Association (ENA) is deeply concerned about an Inland Revenue draft proposal to tax discounts returned to customers who are beneficial owners of their lines’ company.
Chief executive of the ENA, Graeme Peters, said the ENA has challenged the decision, “which we estimate will remove $24 million in discounts returned to customers each year”.
The tax change will affect nearly half a million consumers who are beneficiaries of trusts which own their local lines company.
“We acknowledge the right of Inland Revenue to review this long-standing issue but we strongly disagree with its draft conclusion that a rebate or discount should be taxed.”
Up to 15 members of the ENA currently return a rebate or discount to their beneficial customer owners. The mostly annual discount is applied to the most recent power invoice and often leads to a significant bill reduction when needed most, at the end of the year in the lead up to Christmas.
The total discount paid in 2015 summed to $86.7 million, which would be taxed at 28 percent if the Inland Revenue had its way.
Currently discounts are tax free but Inland Revenue wants to treat them as a distribution of profit or a dividend, which are taxed.
Lines companies are effectively returning money paid by their consumers through the year that was not needed, given there had been no significant repairs and maintenance requirements due to contingencies such as weather events or earthquakes.
The discount was not a commercial dividend and consumer-owned trusts were using exactly the same principle as large commercial firms which discount products using ‘cash backs’ for purchases and don’t get taxed on the cash back value, Mr Peters said.
“While ENA is concerned about the IR proposal, we are very disappointed by its reported comments that there is no impact on consumers because the transaction won’t be part of their individual tax returns.
“While this is technically correct, the tax will still have a significant impact because it lowers the amount they receive in the form of a discount or rebate.
“Though the tax will be paid on their behalf by the lines company, it is their consumer owners, most of whom are in provincial towns and rural areas, who will bear the brunt of the tax”.
Responding to a call for feedback, the ENA sent IR a well-researched, constructive submission on the proposed tax on February 28, 2017.
Consumers affected by the tax decision are in Northland (North Power and Top Energy), Counties (Counties Power), Waikato (WEL Networks and Waipa Networks), central Hawke’s Bay/Tararua (Certralines, Scanpower), West Coast (Westpower), top of the South Island (Network Tasman and Marlborough Lines), Canterbury (MainPower and EA Networks), North Otago (Network Waitaki), and Southland (the Power Company).
For more information, contact Graeme Peters 027 66 77 400
The Electricity Networks Association fully supports an international call for a review of the low fixed charge regulations.
“The regulations are a barrier to the introduction of new and innovative pricing methods which give consumers more choice on how they pay for a connection to a reliable electricity network,” Graeme Peters, ENA’s chief executive said.
Peters was commenting on an International Energy Agency report.
The ENA has asked repeatedly for the government to remove or, at the very least, review the low fixed charge regulations.
“Hopefully the IEA report will result in the government announcing a review of the low-fixed charge regulations as soon as possible.”
Peters said the IEA report was a thorough and well-researched contribution on New Zealand energy in its broadest sense.
“The IEA has identified that artificially low fixed charges result in customers paying high tariffs for their electricity consumption through volumetric charges. The IEA report is correct when it says that undue reliance on volumetric network charges has the potential to distort efficient investment, operation, and use “at the expense of consumers”.
The ENA fully supports the IEA’s view that network tariffs should provide signals and incentives for efficient, timely and innovative investment. “We agree that regulation should identify and remove any undue barriers to the introduction of cost-reflective, real-time network pricing – especially the damaging and distorting low user fixed charge regulations.”
The IEA is also supportive of wider distribution pricing reform, and so is the ENA. Members are working collectively on ways to better match lines prices with the cost of supply. For a summary of recent and significant activity, see http://ena.org.nz/new-pricing-options/
Regarding the IEA’s comments about the distribution sector’s productivity, flexibility and capacity, the ENA would make the following points:
The ENA notes that the IEA report comments on the number of New Zealand lines companies – 29. The ENA would note that this is less than half the number of NZ lines companies in the early 1990s. And it is considerably less than in the IEA case study on Sweden, which has 170 distribution operators.
Nearly all New Zealand’s 29 lines companies are owned by community or consumer trusts, or by local government. Because of this ownership model, lines companies are closely linked and in touch with their communities and consumers. As such, consumers – through their elected representatives – are well placed to make their own appropriate choices and decisions on what is best for their communities in regard to future ownership of critical electricity infrastructure.
One of the advantages of the structure of New Zealand’s electricity distribution sector is the innovation benefits from a diversity of thought, views, and approaches to similar or common issues. This encourages fresh thinking and solutions which become shared learnings among the wider industry. And, as the IEA notes in its report, there is little evidence that small firms are less innovative or perform less well than large ones.
ENA also notes that there are significant synergies between these companies through management agreements, shared services, and contracting. For example, two operating companies are responsible for the management of five of the 29 lines businesses. Further, some networks are responsible for other networks’ maintenance, fault response, and capital works through contracting agreements, both in New Zealand and overseas.
ENA members also facilitate efficiencies through their industry association. Members pool their resources to work collectively on areas as diverse as regulation, public safety, distribution pricing, health and safety, environmental planning, vegetation management, and consumer engagement. Another important and growing area of cooperation is consideration of the future requirements of electricity distribution network customers in the context of the adoption of ‘smart’ technologies.
The Electricity Networks Association has given a tentative thumbs up to the final outcome of the Commerce Commission’s input methodologies (IM) review.
The methodologies are the upfront rules, processes and requirements of regulation of monopoly utilities such as electricity lines companies, and are important to ENA’s 17 regulated members.
ENA’s chief executive, Graeme Peters, said the commission had a difficult job “but it has largely succeeded in delivering long-term stability and predictability for electricity distribution companies, which has flow on benefits for two million household and business customers”.
“The commission has in particular listened to the evidence supporting changes and improvements to some out-of-date methodologies, while simultaneously removing red tape.”
The first IMs were determined in December 2010. The new IMs will apply from 2020.
ENA members, through their membership association, put significant resources into the IM review process for the benefit of members and, ultimately, their end consumers. It and its advisers prepared 23 separate submissions and expert reports through 2015 and 2016 ahead of today’s announcement.
“The positive changes in particular include changes to the form of control and either small improvements or stability with respect to the important calculations for determining a fair rate of return.
“For example, ENA members supported changing the form of control from a price cap to a revenue cap. This change will reduce forecasting risk, incentivise efficient pricing, and encourage investment in energy efficiency and demand-side management. The commission agreed.”
ENA also sought a faster write-down of the value of some assets which have economic lives impacted by new technologies. The commission has confirmed it will allow accelerated write down of average remaining asset lives of up to 15 percent on average.
Mr Peters said that there were parts of the decision which members did not support. For example, the commission has confirmed that it will remove the avoidable cost allocation methodology, known as ACAM.
“Our organisation had sought to retain ACAM – because removal would add a significant administrative burden on EDBs for no benefit to consumers.”
There were other disappointments but overall the commission has delivered stability, predictability and, on average, improvement in its input methodologies for EDBs and consumers.
The Commerce Commission announcement can be accessed here
For more information, contact GPeters@electricity.org.nz
The second version of ENA’s Pricing Guidelines for Electricity Distributors has now been published by ENA on behalf of the electricity distribution businesses. This follows a consultation in September that provided an opportunity for key stakeholders to submit comments on the draft version of the guidelines.
The pricing guidelines document and a summary of the consultation submissions (with ENA’s response) are available below:
For further information, contact:
The Electricity Association of New Zealand
Tel 027 667 7400
Held on 19 October in Christchurch, ENA’s annual conference was themed around consumer engagement.
With presentations around the Australian experience in electricity pricing reform, through to presentations from Christchurch City Council’s chief executive, Karleen Edwards, and political commentator Pattrick Smellie, ENA’s annual conference covered a lot of ground.
The Electricity Authority convened a full day conference involving 168 attendees from distribution companies,
retailers, ENA, the Electricity Retailers Association (ERANZ) and other interested parties at Te Papa on 17 August to discuss mechanisms and options for changing distribution pricing.
ENA members were well represented and many were strongly (more…)
How much revenue lines companies can earn is regulated by the Commerce Commission. A recent report on the profitability of lines companies shows that most were within one percent of the limit set by the Commission.
Visit the Commerce Commission website for more information.
Date: 29 June 2016
But clarity around the low user fixed charge regulations would remove only one of the many concerns with the low user charge, chief executive Graeme Peters says.
Electricity Authority chief executive Carl Hansen told an ENA forum this week that the authority had been working on improving guidance around the regulations and that a paper was going to the next EA board meeting on June 29.
The ENA and many other representative groups, including electricity retailers, asked for clarity on the regulations earlier this year.
“We’re very pleased the Authority has listened. The interpretation of these regulations is ambiguous and we’re hoping the new guidance will provide precision for network companies and other participants in the sector. If the guidance is clear it will avoid any ambiguity and leave little room for confusion,” Mr Peters said.
There are differing legal interpretations of some aspects of the regulations. This lack of clarity has been reinforced by the ENA’s own legal advice. The ENA considers that the level of uncertainty on how the regulations should be interpreted prevents the development of new ways of pricing for their services, and adds complexity to existing pricing.
“Our members want to give consumers new ways to pay for network services. These new pricing options would reflect the actual cost of providing the service and so remove cross subsidies and inequalities that penalise some customers – in particular large families on low incomes.”
Mr Peters said although the ENA welcomed a clarification of the regulations, the ENA believes it’s time to review the long-term effects of the low user fixed charge, and look at alternatives.
The Electricity (Low Fixed Charge Tariff Option for Domestic Consumers) Regulations 2004 require electricity retailers to offer a low fixed charge tariff option or options to domestic consumers at their principal place of residence. Approximately half of New Zealand residential consumers are on the low user fixed charge.
Date: 24 June 2016