Aurora Energy makes CPP application to the Commerce Commission for review

12 Jun 2020

Aurora Energy today made its formal application for a customised price-quality path (CPP) to the Commerce Commission. The application follows Aurora Energy’s draft proposal for public consultation released in November last year.

The revised proposal has retained only what is absolutely necessary for safety, reliability and to connect new customers. Any additional spending has been removed, reducing the total three-year spend by $20.4 million from $404 million to $383 million and lowering the overall customer price increases from an 18% to a 13% increase on the total estimated power bill.

Our revised CPP proposal will still…

  • Deliver a safe network and address renewal backlogs
  • Keep pace with emerging risks of an ageing network
  • Improve the health and condition of critical network assets
  • Stabilise reliability at current levels
  • Continue to support the level of expected growth in demand
  • Prepare the network in readiness for future technology uptake.

But our plan has been moderated in several areas…

  • Removed any spending not urgently required for safety, capacity and to connect new customers
  • Reduced total three-year spend by $20.4 million from $404 million to $383 million
  • Lowered overall customer price increases from an 18% to a 13% increase on the total estimated power bill
  • Smoothed the introduction of new prices over three years to reduce the overall impact
  • Deferred non-critical renewal and growth projects as recommended by the independent verifier
  • Removed or deferred selected growth-related projects and network reinforcement in line with expected lower forecast demand resulting from Covid-19 impacts.

The Commission will review our application and ultimately determine final expenditure and revenue allowances and reliability standards. The Commission’s final decision is expected in March 2021.

Aurora Energy Chief Executive Dr Richard Fletcher said, “Our revised CPP proposal details a three-year programme to continue essential investments, maintenance and upgrades to improve the safety, reliability and resilience of the electricity networks that supply Dunedin, Central Otago and Queenstown Lakes.

“The proposal we submitted today has been revised to reflect customers’ preferences, incorporate feedback from the independent verifier and to respond to the expected impacts of the Covid-19 pandemic.

“We thank the many customers and community organisations for their time and generosity in contributing their views on our future investment plans. Their feedback has shaped our final proposal and given us better insight into what was important to customers and what they expect from their electricity supply.

“Getting the right balance between the cost to customers and the urgent need to improve the condition of network assets is very challenging. Either we increase prices to make the necessary investment or we maintain current prices and the safety and reliability of the network gets worse.

“Customers told us they wanted essential work to be done, but that the pricing was a real concern. We have kept safety and affordability at the forefront when refining the draft proposal to keep the proposed price increase as low as possible without compromising essential safety work. We have removed any additional spending and only retained what is absolutely necessary for safety, reliability and to connect new customers.

“Customers told us they were satisfied with the current reliability of their electricity service. Accordingly, our plan will stabilise unplanned reliability at current levels and we have asked that reliability limits reflect that. Under our proposed plan, we forecast planned reliability remaining at similar levels to the past three years’ average as we continue high levels of renewal and maintenance on the network.

“We understand that price rises required to fund this work will be difficult for some customers and we have made every effort to reduce the overall proposal and look for ways to offset the pricing, including exploring an energy assistance programme. However, the alternative to raising prices is a continued deterioration in the safety and the reliability of the networks that power our communities.

“The final decisions on the scale of the investment and related revenue and reliability standards will be determined by the Commission, following customer feedback and, potentially, further refinements by Aurora Energy, in March 2021. Any customer price increases would take effect from 1 April 2021. Background on Aurora Energy’s CPP and more information on the Commission’s review and consultation process can be found on its website www.comcom.govt.nz/aurora.”

For more information about Aurora Energy’s CPP proposal for future investment and the CPP application submitted today, please visit yoursay.auroraenergy.co.nz.

Customised price-quality path (CPP). The Commerce Commission can set a customised price-quality path to better suit the needs of a regulated electricity business and its consumers. On 12 June 2020, Aurora Energy applied for a three-year customised price-quality path to take effect from 1 April 2021. As part of the regulatory process, the Commission will review our application and consult further with interested parties before making its final decisions on Aurora Energy’s revenue and reliability limits.

Customer consultation. From November 2019 to January 2020 Aurora Energy consulted its customers and the community on its future investment plans outlined in the consultation document, Your Network, Your Say. All the feedback we received is summarised in the Consultation Report accompanying the application. Consultation was wide-ranging and included:

  • Consultation website that was visited more than 4,400 times with online submission and feedback tools
  • Customer Voice Panels in Dunedin, Cromwell and Queenstown and a Customer Advisory Panel of consumer and community representatives that published an independent report on our draft proposal
  • Meetings with representatives of electricity retailers, local councils, major customers and stakeholder groups such as Age Concern, Cosy Homes Trust, Presbyterian Support Otago, Federated Farmers, Major Electricity Users’ Group, Electricity Retailers’ Association of New Zealand and regional Chambers of Commerce
  • Formal customer research, before and during consultation, with a representative sample of more than 3,700 residential and business customers across our network regions to establish service preferences in relation to price paid
  • Print advertising in community and regional newspapers with a circulation of 110,000
  • Social media posts and advertising with a total reach of 125,000 and videos watched 4,185 times
  • Publication of consultation document Your Network, Your Say available at community locations and online that was downloaded from the website 539 times
  • There were 93 submissions received on our draft proposal.