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Payout Up – Costs down
Improve your herds “submission” rates this season
for less cost than last year.
WITH the appointment of Mark Darrow
as chairman of The Lines Company’s board of
directors’ on August 4, Waitomo News journalist
Heather Carston put some questions to him that
the community has been asking over a number
of years. These are his responses.
QTLC has been insistent that its consum-
ers do not understand the pricing struc-
ture. What do you believe they need to be more
educated about, and in particular, why TLC has
decided to use this model despite the continued
extreme displeasure from most of its customers?
AIt’s indicated by media reports of criticism
by a faction of our consumers that there
is misunderstanding of the difference between
total consumption and peak demand. TLC is
leading the industry with capacity charging – also
termed ‘service based pricing’ by the Electricity
Authority – and other networks are looking at a
similar approach. We need to make it clearer to
our customers that we need to work with them to
help them manage their charges. The objective is to
more efficiently manage load on the network and
therefore costs incurred by TLC through avoided
Transpower charges and ongoing costs from capital
QThe Commerce Commission’s (Com-
Com) profitability of electricity distribu-
tors following first adjustments to revenue limits,
shows that while TLC was the company which
charged the least (percentage wise) of what could
be charged under the current regulations, the dif-
ference between the forecast and actual growth
due to changes in billed quantities put them in
first place – as it did with the impact on returns
between the forecast and actual revenue growth.
So, what that appears to mean is that TLC “looks
good” by charging less than the limit on one
hand – but smudges the moral line in the sand
by charging at what equates to be winter rates all
year round (capacity rather than consumption)
which gives it this much greater revenue. Is this
correct? And if so, what is the reasoning behind
it in that customers are basically paying for the
cost of a winter power bill all year round?
Asseen in ComCom figures TLC are charg-
ing less than their allowable annual rev-
enue. TLC charges are based on peak demand and
capacity and the infrastructure required, not for
consumption. It is an annual infrastructure charge
split into 12 monthly instalments.
QOn that same note, there are customers
who believe that using the six highest
consumption points during a year to base the
prices charged is morally unethical. Why did
TLC, if that is the case, not take the three highest
and the three lowest to find a median average?
ASome customers do believe that they are
being charged for their highest consump-
tion points in the year. This is a misapprehension.
Customers may have high peak consumption
outside of load control periods that are not part
of the kW load portion of their invoice. The kW
load portion of the invoice is calculated using the
six highest qualifying peaks across a two hour pe-
riod when there has been a period of load control.
QIf the issue is the ag-
ing network that is
being maintained rather than
replaced, how has the value
of assets jumped from $177
million in 2010 to $245 mil-
lion in 2015?
AThe change in asset
value reflects the on-
going investment made by TLC
to improve and maintain the
QChairman of the
former Turangi Net-
work Action Group Denis
Greenslade believes that the
Electricity and Gas Author-
ity has found that what TLC
is doing is illegal and it cites
Alisdair McNab’s case against TLC, in that TLC
is not following their own terms and conditions.
What is TLC’s stance on this?
AMr Greenslade’s understanding is not con-
sistent with our interpretation and we are
addressing the issues that arose around conflicting
QTLC has brought what was the King
Country Electric Power Board’s charges
from being the lowest in the country, to the high-
est when it comes to line charges. Considering
that other suppliers in other areas of rugged
terrain and isolated areas have the same issues
with aging assets, but with much less cost to
consumers, what is TLC’s reasons for doing so?
AThe nature of the industry and safety
requirements has changed dramatically
between 20 years ago and today so a valid com-
parison is not possible.
QIt has been pointed out that Northern
King Country shareholders of TLC are
the only beneficiaries and that Southern King
Country consumers were never included in
the set-up of TLC and therefore, the latter have
subsidised/paid for one half of the original cus-
tomer base since the split under the Electricity
Reform Act – which makes the set-up unfair and
potentially legally challengeable. What is your
stance on this?
AUp until 2014 all consumers were repre-
sented by either WESCT or KCEPT. In
2014 the southern customer trust (KCEPT) sold
their remaining 10% share in TLC. TLC is now
solely owned by one customer trust – WESCT.
There are network companies in NZ that are no
longer owned by customer trusts at all. Customers
in the Southern King Country area remain ben-
eficiaries of the KCEPT
QIn TLC’s pric-
ogy, it states that TLC
charges customers for
their capacity and de-
mand requirements as
opposed to their ener-
gy consumption. What
does that mean and why
are they not charged on
consumption? What is
the average actual differ-
ence between capacity
and customer peak re-
quirements from TLC’s
AThe use of pow-
er consumed is
provided by and charged for through an electricity
retailer on a consumption basis. The infrastructure
that has to transport that power is paid for through
network charges. As the size and costs to the net-
work are driven by capacity and peak demand,
it is this that is reflected in how the charges are
calculated for each customer.
QAlso in the methodology, it states “direct
to customer billing services and cus-
tomer engagement...” yet two paragraphs down
it states “customers on the network are grouped
by similarities at point of connection, demand
density and capacity requirements; those three
factors influence the cost of supply to the cus-
tomer.” Are those two statements potentially
ANo, both statements are complementary
and consistent with each other.
QThere is widespread belief that the TLC
Board of Directors is being directed
in its operations and mindset by the WESCT
Trust – which has legal ramifications. As the new
chairman of the board of directors, what is your
answer to this?
AThe interactions between the trust and
TLC are consistent with normal relation-
ships between owners and their company. The
TLC board performs a normal and professional
governance role over the company.
QElectricity Authority chief executive Carl
Hansen said in June that while TLC has
made improvements, he’s assigned a market-
performance team to take a look, based on new
correspondence with customers. What does that
mean for TLC? (New Zealand Herald, June 28)
ATLC has welcomed the recent decision
from the EA to review its pricing methods.
QThe Commerce Commission warned
TLC in 2013 and again in 2014 under
the Fair Trading Act about lack of disclosure
and misrepresentation. But it said it was content
with TLC’s profit, which it regulates, and says the
methodology is down to the Electricity Author-
ity. How has TLC dealt with this warning in the
past three years?
ATLC took appropriate action at the time
to comply with the Commerce Commis-
QThe KCEPT has signalled it may be pre-
pared to help fund legal proceedings or
the appointment of a Queen’s Counsel to TNAG.
(Note: This group has now been replaced by the
Tongariro Ratepayers and Residents Associa-
tion). Considering that its beneficiaries are all
consumers of TLC, doesn’t this emphasise the
big gap between TLC and its customers?
AWe are not in a position to comment on
what is speculation at this stage. We have
recently met with trustees of KCEPT and maintain
a positive working relationship.
QTLC is the third smallest transmission
company in NZ having just 1% of the
lines market, yet accounted for 35% of all cases
involving lines companies to the Electricity and
Gas Complaints Commissioner for two years in
a row (2013, 2014), and 26% in 2015 according
to EGCC records, putting it in the top three of
all complaints for such companies for at least
the past three years*. How will TLC be address-
AWe are aware that in the years that you
have quoted the maximum number of
complaints from TLC that went to the EGCC
was 24, out of approximately 24,000 connections
on our network.
* It is understood by the Waitomo News that some of
those complaints represent groups of people.
QIs TLC’s load controlling based on the
data on EMS’s system for the lower
North Island? We’ve been told it is and it is used
because TLC does not have the technology of
its own to monitor load peaks. Is this correct?
AThose assumptions are not correct.
Q&A time with new TLC chairman
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