Finance
The regulatory framework continues to shape
the requirements of the finance department. This
last year saw a revaluation of network assets
under new regulatory rules from the Commerce
Commission – this was a significant body of
work and involved both the finance and asset
management teams. We also worked on the
starting price adjustment for the Commerce
Commission 2011-2015 price reset. Currently we
are well under the initial threshold announced
by the Commerce Commission. That reset was
however delayed by the legal action from Vector;
this action has now been decided by the Court of
Appeal with Vector losing its bid to change the
process. We expect the Commerce Commission to
finalise the new thresholds soon; we will announce
any price changes to our customers once the final
price reset is advised.
An integral part of the Finance Department’s
role is in assisting the board explore alternative
strategies and other areas of revenue for the
long term profitability of TLC. It is essential that
alternative profit streams are available to support
our network and provide a funding stream for
other business activities.
Pricing
In October 2011 the customer consultation
into our pricing structure was completed. This
consultation involved two reports, the TLC
commissioned Sapere report and the Ruapehu
District Council/King Country Electric Power
Trust commissioned NZIER report. Both reports
accepted that peak load pricing was a good idea;
both reports accepted we needed to upgrade
our meters and both reports accepted that the
Commerce Commission regulates our revenue.
The point of difference came when comparing
load charging with consumption charging; the
NZIER report favouring a high charge based on
consumption over local peak periods.
As explained above, if we charge on consumption
this would mean that permanent residents and
families would pay considerably more. As our
network is of equal benefit to both permanent
and holiday residents, and both all year round and
seasonal businesses, we did not see this as fair.
One of the consultation questions specifically
asked the submitters to suggest an alternative
way of allocating the costs that was different
from load charging. None of the submitters, other
than NZIER, provided any alternative solutions for
investigation.
The Sapere report made a number of
recommendations, including:
the development of a number of profiles to
•
address the difference in customer consumption
patterns
a move to measuring six x 2-hour peak periods
•
raising the holiday home minimum to over 3kW.
•
After consultation with our customers and
the feedback received during the consultation
meetings, TLC decided not to adopt the majority
of the Sapere recommendations. The customers
highlighted the three main areas of concern as
inequality (especially in the accommodation
industry), customer communication and the need
for better technology. There was also concern
that one three-hour measurement period was two
narrow and that a wider measurement base was
required. We therefore moved from using a single
three hour peak period in the Time of Use meters
to calculate load to an average of the top six two-
hour periods, as recommended by Sapere.
We also investigated whether more profiles were
needed to ensure equality across our customer
base. For this year, 2012, based on a review of
data and the customer consultation process, we
established only one extra profile, Temporary
Accommodation, as this area had been identified
as providing the largest inequities.
This profile includes holiday homes and
accommodation businesses. Our other profiles
are dairy farms and standard users. We developed
the new profile for Temporary Accommodation
customers in response to a company analysis
of usage patterns and criticism from the
accommodation industry that the (then) current
system was unfair. Now all properties used as
accommodation on a temporary basis will have
their load calculated in the same way.
However rather than put more effort into further
profiles, the Board decided that it would be better
focusing on the testing and eventual roll out of the
new Smart Meters, which will remove the need
for profiles. In the meantime we have included as
keeping you connected
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