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Business hits out at Transpower price rise proposals

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Sept 27 NZPA - The Employers and Manufacturers Association has hit out at price rise proposals from state-owned grid operator Transpower.

Transpower and its electricity partners had gone to the Commerce Commission asking for permission to raise their prices so they could guarantee themselves an almost 12 percent pre-tax, risk-free return on capital to upgrade the grid, the association said today.

"The request is to increase prices so they can expect over 8 percent return on capital after tax, which equates to nearly 12 percent before tax," association chief executive Alasdair Thompson said.

"The price increases being sought are grossly unreasonable in a flat and struggling economy."

The grid upgrades were necessary, and would be paid for by a mix of shareholder funds and borrowing which had to be paid off from future profits boosted by price increases, Mr Thompson said.

"But monopolies extracting the sort of return that Transpower wants must be reined by the regulator."

NBR reported that on Friday Transpower chief executive Patrick Strange said customers could expect a "couple of years" of double-digit price increases as new projects were launched.

Transpower's transmission charges were now about 8 percent of residential and commercial power bills and were forecast to stay below 10 percent during the next 10 years, despite the double-digit increases, Dr Strange said.

The exact figure would depend on the Commerce Commission's decision on acceptable rates of return on cost of capital, part of a number of decisions on pricing due by the end of the year.

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