Wellington Scoop

The Bahamas, the Cayman Islands, and our increasing electricity charges

In a week when politicians are questioning trust accounts that arrived in Auckland via Panama, Wellingtonians should be thinking instead about a company with connections in the Bahamas and the Cayman Islands – and how it has a direct effect on our daily lives.

Wellington Electricity Distribution Network Ltd has total control of our electricity network. But the Companies Office records the fact that a hundred per cent of its Hong Kong owners’ shares are allocated to a company in George Street, Nassau, and its “ultimate holding company” is in the Cayman Islands.

There’s not one Wellington resident on its board. There’s no director to speak for us, no one to tell the board that we’re unhappy about our electricity bills going up again. The company’s only New Zealand director has an address in Parnell, Auckland. All the other directors live in Hong Kong.

The company is having a direct effect on our power costs this month as we receive our April electricity bills, though one supplier seems reluctant to be specific about this. Nova Energy wrote to its Wellington customers this week:

Charges from your local network company have changed … As a result, we’ll be changing your pricing from 20 April… We are passing through your local network company’s updated charges in full …

Nova seems reluctant to admit that it’s increasing its charges.

But Wellington Electricity had no such reluctance when it made the announcement in February that its charges would be going up this month. The increase, it told us, affected 40% of our total electricity bill, which is the portion of the bill related to lines services.

How much discussion could there have been before the Hong Kong directors agreed that they needed us to pay them more for our electricity?

Financial statements filed with the Companies Office show that revenue earned by Wellington Electricity Distribution Network from its customers last year was more than $177million. We are paying it well for its service.

Operating expenses (including a management fee of $10million paid to a related party) are shown as $97million.

But this didn’t result in a profit. The accounts show a loss, with a major cause being the fact that almost $50m was spent paying interest on overseas borrowings – including a loan “from a related party.” Borrowings, no doubt, which paid for the purchase of the Wellington network back in 2008.

The Wellington and Lower Hutt city councils owned the electricity network till the early 1990s, when the two entities were merged and privatisation arrived. TransAlta became the owner, till 1998 when it sold the network to a Kansas banking group. The Kansas bankers sold it to Vector in 2002. And six years later, Vector sold it to the current Hong Kong owners, who then set up shop in the Bahamas.

In a report for the Fabian Society published in 2011, three local analysts estimated that after the first twenty years of privatisation, the cost of running our electricity network had gone up by a colossal 295 per cent.

In comparison, the cost of running the city’s other essential service – the supply of water – had gone up by only 17 per cent.

But of course our water supply systems have never been privatised.

Economist Peter Harris, policy analyst Jim Torrens and businessman Dick Werry did those calculations five years ago. Both businesses, they wrote, are natural monopolies which supply an essential and undifferentiated product – the consumer has only one inlet providing the service. They found that over the twenty year period, total water consumption fell significantly, in spite of an increase in population. “Needless to say,” they wrote, “shrinking sales figures would not be regarded as a desirable outcome for a private company.”

And their conclusion: “Water and electricity networks are absolute and unfettered monopolies which supply an essential service. Their use cannot be avoided by the individusls and communities that they serve, and their funding is akin to an unavoidable cost which is the nature of a tax. Not surprising that a foreign [owner] has bought into the electricity network. It was madness to sell it in the first place.”


  1. Ben, 8. April 2016, 8:52

    This is shocking and now we have the Wellington City Council trying to sell off more – like our Civic Centre park and buildings, which will be of little benefit to Wellington or the ratepayers. The only people who benefit in these sell-offs are the private owners who generally care little for the people their decisions affect.
    Vital services such as the Wellington Electricity Distribution Network should not be in foreign ownership, particularly if such companies pay no tax in New Zealand. How can anyone justify the massive 295% increase in costs since privatisation?
    It is time something is done about this, as greedy and/or incompetent councils are only interested in short term gain, and will continue to make such irresponsible decisions because there is little accountability. And when it all turn to custard, most councillors who made the initial decisions have moved on to greener grazing.

  2. Molly Melhuish, 8. April 2016, 9:28

    New Zealand regulation is unique in the world in the way it protects investors in the electricity industry at the expense of consumers.

    Wellington Electricity is raising their prices to the maximum allowed by the Commerce Commission.

    Lines companies also aim to protect their revenues and profits from reduction in electricity demand caused by the potentially widespread investment by consumers in solar energy. They want to make rooftop solar systems uneconomic.

    The Electricity Authority supports that. They say the money saved by people who install rooftop solar must be made up by people who can’t afford to invest. They say lines companies have a right to their expected return on investment – but consumers do not.

    Correct! Prices are higher than the market will bear. Until New Zealand changes its laws, to protect consumers against monopolistic pricing, those who can afford it will invest to reduce their power bills. Those who cannot afford to invest will suffer energy poverty.

  3. Kerry Wood, 8. April 2016, 10:39

    I have just had personal experience of Wellington Electricity ‘service.’

    My power was to be off for three hours between 9 AM and 3 PM on the 5th, for pole replacement. I shut down my computer at 9. At 11.30 when nothing had happened I phoned the contractor’s contact number and got a response at 2.30: Not today.

    The alternate day was the 6th: my info card said the 16th. It was all much the same, so I phoned the Wellington Electricity number: they knew nothing about work on either day and would send around a foreman. I heard no more.

    I still haven’t.

  4. Richard, 8. April 2016, 20:56

    We need names. The names of the councillors who voted for the sale of the public asset to private interests. Those documents then need to be placed in the public domain. Deny them the security of anonymity.

  5. Brian, 8. April 2016, 21:09

    Everyone wants to own a monopoly.
    Telecom shares were about $7 while Theresa Gattung stalled for years on reforms. When Helen Clark had finally had a gutsful of this, and put her foot down, the shares dropped to about $2.50. This was the true value of the shares in a less monopolistic market.