Powerco borrows to repay bonds

The headline of this story should read "Powerco borrows to repay bonds"

Basically Powerco has had to borrow money to repay the maturing bonds for next year.  Deeper in the article we learn that there is $320 million more of bonds due to mature across the next 7 years which Powerco does not seem to have the financing for.  

The article also points out that Powerco has a rating of BBB, which is the most minimal of all of the acceptable ratings.  

We at the Power Panda feel that BBB is too a high a rating for Powerco's service.  Their network is old, and has daily outages.  They also are a for profit lines company which means in their area you get no electricity rebates.  

But it is interesting that Standard and Poors do not think that our second largest lines company is a secure investment.  They are a lines company, there is constant demand for the services, a captive market, an ability to charge to cover costs, and no real liabilities.  That really should be considered a good investment if properly managed and maintained.  

<disclosure, we own no Powerco Bonds>

Phil Goff and Electricity Prices

For those of you who watched TV 3 last night Phil Goff blamed the government for high electricity prices, and called it 'price gorging'

We've written about the high prices of electricity on more than one occasion. To blame it on the government is perhaps a little simplistic.  Certainly government action has increased the price of electricity, but the restrictions imposed by the last Labor government with medical customers in our mind is more of a reason for high prices than Goff's alleged 'price gorging'.

It wasn't that long ago when people were complaining that the Power Companies were not producing an adequate return for the government.

The problem is more complex than certain politicians seem to want to believe.

Also we think that any regulation to lower power prices is likely to be futile.  Electricity companies are very good at raising prices, so in order to lower your power bill we recommend purchasing a Power Panda.

Mercury Energy already has a fee for paying the power bill at New Zealand Post.  If the government legislates to reduce electricity prices I'm sure we'll see fees for paying power bills with credit cards, processing fees, and more 'one-off' fees that more than compensate for the reduction in revenue.

Just to follow up on that last post

As it could have been confusing - We are not sure what the effects of the arrangement have been.  Most of the details have been kept secret.  

However we think the entire arrangement smells and we're not certain it won't come back to bite New Zealanders.

Who owns our national grid?

We at the Power Panda uncovered a rather shocking article in the NZ herald yesterday.  The article is from 2005, and the agreement discussed was done in 2003, but it was still something we had no idea about.

The crux of the article is that Transpower leased the South Island's national grid to an American investment company, who then leased it back to Transpower?  It is confusing.  It's called a cross border lease and "cross-border leasing has been criticised by Canterbury University accounting academics Alan Robb and Sue Newberry, who said it was shonky and, in the case of the Transpower deal, had put ownership of the grid at risk."


Really?  Shonky?  We would have used some much stronger words.  It sounds a lot like a buy-back scheme.  


In fact "Dr Newberry said the concept - called "lease-in, lease-out" in the US - had been subject to a big tax inquiry in that country and the authorities were now shutting such schemes down."


In fact such complicated arrangements have been deemed illegal in New Zealand, with the most high profile being the Trinity arrangement.


But getting back to the point, Transpower obtained $34 million under this arrangement.  Nobody seems to know how long the arrangement is for.  Michael Cullen claimed it could not open the door for foreign ownership of the national grid, but to be honest we're not sure we can believe him.  
What the other party gained is some loophole tax advantage worth to them almost certainly more than $34 million.  


The rest of us got higher power prices and a confused head.  

Yes it still happens with advanced meters

We at the Power Panda have blogged earlier about the madness of medically dependent customers.  
To recap - The Power Companies in response to political pressure decided to implement systems to ensure that no person could ever have their power cut off if they could possibly be dependent upon electricity for their health.  In other words they decided to assume customers needed electricity to live and act according.  


With advanced meters as we mentioned yesterday the power companies can turn the power on and off at the property remotely with an advanced meter.  With standard meters it requires a contractor to go out to the property to disconnect.  Now when the disconnection is for non payment this can be quite an advantage.  Contractors are often abused and/or threatened.  Additionally since the unfortunate incident of  Folole Muliaga contractors are often reticent to turn the power off (more on this point another day).


So you can see why a Power Company might want to turn the power off remotely.  What large sections of a prominent Power Company were unaware of (until July) is as follows:


The credit team decided that it could pose a hazard to some customers if this were done.  They decided that in order to prevent the Folole Muliaga incident from happening again if a customer was due to be disconnected for non payment and the customer had not contacted the power company within the past 21 days they would send a contractor to the site to knock on the door of the customer and inquire if the customer was aware of this, and to ensure that the customer was not medically dependent.  


Seeing as in most cases customers do not contact the power company with their overdue bills the advanced meter disconnections actually cost this power company more than standard disconnections.  


However what happened is that customers who told the contractor "I'll pay the bill" automatically 'looped' within the system.  In short what it meant was that the disconnection would be rescheduled.  This meant that the account would have no further action for a week.  After this an automated letter would be posted out to the customer reminding them of the overdue bill.  The next week a text would be sent to the customer.  So by the time the customer came up for disconnection again there was often 21 days or more, and if there was no contact....
the situation happened again.  


Would you believe it?  
We didn't at first.  But it's just another example of the madness that is our electricity industry.  
We'll touch on other aspects later, but hopefully this is a good enough explanation for now.

An advanced meter

A reader asked us at the Power Panda this week about why our previous post didn't mention smart meters at all.

The simple reason is as follows:
A 'smart meter' is not a different type of meter, it is a different way of reading a meter.

To explain further, a smart meter allows the electricity company to read your meter remotely, and to turn your meter on and off remotely.  That is all the difference.

You still have an anytime configuration, night only configurations, controlled configurations, etc.  You will still have a meter type.  However with an advanced meter your meter is read remotely.

(The meter has access to the vodaphone network.  What happens is that the power company sends a text to the meter telling it to read itself, and the meter sends a response back by text).

That is all that is advanced about an advanced meter (actually that's not quite true, the power company can turn it on and off remotely via text also, but those two are the only differences).  Your advanced meter does not save you money, and it is really only for the benefit of the Power Company.

It's not a different meter type, just a different way of reading the meters.

The Power Panda and electricity companies

From time to time we at the Power Panda are asked how the power companies are treating our device.

The short answer is that they are hoping we will just go away.

Not only is our Power Panda reducing their total income in the residential market we have just finished the testing on a device to reduce the electricity industries need.  Should we achieve our goal in putting one in in every business in this country the power companies will loose 20% of their revenue.

At the moment we seem to be flying under their radar.  Our attempts to sell our Power Panda devices to electricity companies (for them to give to customers) were ultimately unsuccessful.

What will happen in the future, we're not sure, but we've seen the ugly insides of Power companies and we're confident that we can continue selling our Power Panda without difficulty.