Vector's revenue gives it a third of market share

Just three of the 29 electricity distributors made more than half the industry’s revenue from 2010-11.

A new Commerce Commission report into the performance of electricity distributors shows revenue was $2.1 billion, up from $2 billion in 2008.

Of that, Auckland distributor Vector – the country’s largest distributor – earned $576.8 million during the 2010 year. The majority of the revenue, more than $550 million, came from line charge revenue.

Vector now has a 28% market share, followed by Powerco, which reported revenue of $307.5 million, giving it a 14.9% market share.

Christchurch-based Orion was the third largest earner, recording $200.5 million in revenue, giving it a 9.7% share.

Its revenue from distribution line charges has increased over recent years – by around 6% from 2008-10, over and above inflation.

The increase in revenue comes through a combination of prices increasing and an increase in demand.

Overall demand growth on Orion’s network from 2008-10 was mixed. Small customer connections and electricity consumption grew 4% and 5%, respectively, during that time. Large customer connections increased around 15% but electricity consumption was flat.

The impact of the Canterbury earthquakes on Orion’s current and future cost, revenue, prices and reliability in future years is not clear yet.

Powerco’s revenue from line charges increased by about 2% from 2008-11, with most of its revenue from residential and commercial customers. A combination of demand and price increases played a fcator.

Vector’s total revenue decreased during 2010-11 by about $3 million. The Commerce Commission says most of the drop came from a 1% decrease in the company’s line charge revenue.

There was a decrease in demand from residential and smaller commercial customers during the same period. Small customer connections dropped around 1% from 2010-11, and their electricity consumption by around 3%.

Commission regulation general manager Dr John Hamill says total revenue across all 29 distributors has rose by 5% above inflation over the four years.

“What we have seen over 2008-11 at an industry level is electricity distribution prices have increased, though again, there is wide variation among distribution businesses.” 

He says an increase in demand for electricity distribution services could be partially credited for some of the revenue rise, but it was mostly due to higher prices to pay for investment in the network and increased operating costs.

In November, Vector lost its Supreme Court hearing against the commission's price setting case.

Vector ceo Simon Mackenzie quickly called for a judicial review into the way the commission regulates price setting for monopoly utility providers such as Vector.

bcunningham@nbr.co.nz

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