Transpower, lines companies out of touch with customers

Business has been struck almost speechless at the lack of sensitivity of Transpower and other lines companies.

Transpower and partners have gone to the Commerce Commission asking for a green light to raise their prices so they can guarantee themselves an almost 12% pre tax, risk free return on capital to upgrade the grid.

“Every other business in New Zealand would be very happy to be earning over 8% after tax on their capital right now,” said Alasdair Thompson, chief executive of the Employers and Manufacturers Association.

“For a government owned monopoly to request a 12% risk free rate of return shows Transpower has lost touch with its customers,” Mr Thompson said.

“The request is to increase prices so they can expect over 8% return on capital after tax, which equates to nearly 12% before tax.

“The transmission upgrades are necessary and will be paid for by a mix of shareholder funds and borrowing which has to be paid off from future profits boosted by price increases.

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

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

“Business and residential customers alike will be watching closely the outcome from the Commerce Commission.”