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New Zealand's longest-running online daily news and commentary publication, now in its 24th year. The opinion pieces presented here are not purported to be fact but reasonable effort is made to ensure accuracy.

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A rip-off?

26 June 2018

The wiring, switchgear and transformers that carry our reticulated electricity around the country are an essential part of the nation's infrastructure.

This gear is owned by a variety of power companies who build the cost of provisioning and maintaining this gear into the monthly bill that we get as consumers.

Or at least that's how it should work... but does it?

Personally, I'm kind of shocked at how power companies are ignoring the rules of good business and seemingly ripping excessive profits out of their revenues, instead of setting aside money for expansion and maintenance.

We're told that power costs must rise to pay for new generation capacity -- but why?

Surely good management would, as suggested above, have already built the cost of future expansion into the cost-structure of the business -- BEFORE extracting profits and bonuses for shareholders and well-paid executives.

And, as if to prove just how whacko the current situation is, I read this story in Stuff yesterday.

Hang on a damned cotton-picking minute!

Vector want a property owner to pay over $50,000 in order to upgrade a transformer so that he can connect a handful of town-houses to the existing power feed.

So will the developer own the transformer he's paying for?

Of course not... although he will be paying for it, Vector will own it and they'll continue to charge him for its use.

Does this sound fair?

Not to me.

Surely, if the developer is going to be paying for the transformer then he should own it and he should be charging Vector for its use -- especially when you consider that the upgrade will provide sufficient additional capacity to service a raft of other houses in the area.

Isn't this a little bit like buying a car, only to be told that you'll also have to pay for a workshop to be built in your town in order that the vehicle can be serviced regularly -- but that the workshop will belong to the car company and will also be used to service other people's cars (even though they won't have to pay for it to be built)?

Expecting customers to pay for infrastructure that you then claim ownership of and then have the nerve to charge them an ongoing amount for use is massively double-dipping and ought to be illegal.

However, as we well know, the "deregulated" electricity industry (thanks Max Bradford) has fulfilled none of the promises of: lower prices, increased competition and better service that were bandied about by the politicians who made this smart move.

Is it any wonder that so many people are now going "off grid" when faced with connection fees that may be as much (or more) than the cost of such generation equipment?

Are the power companies shooting themselves in the feet by demanding that customers pay for the infrastructure which should be part of the company's own cost structure?

I wonder if there's a potential business opportunity here for small, fast-moving companies to offer an alternative to the big power company blackmail?

Think about it... for the $50K that vector are demanding, an innovative startup could probably deliver a PVA solution with wind and a standby grid connection -- the only catch being a fixed 5-year contract or something similar.

Yeah, there are all the issues associated with the unreliability of renewable generation and the maintenance of a growing number of small "micro-generation stations" but I'm thinking that a company which was willing to run at a loss for the next five years or so could by some serious position within the renewable marketplace and cement a niche that could, within a decade, become very significant in terms of profit.

Or maybe not.

Anyway... if I was building a new house and the power company wanted to sting me $50K for gear that *they* would own, I'd tell them to stick that where the sun never shines and instead I'd fork out for an off-grid solution -- even if it cost twice as much.

How do readers feel?

Is this ridiculous situation where power companies are so badly run that they force customers to buy the infrastructure without any ownership rights simply unacceptable?

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