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24th February 2021
EA Networks has today announced a refund pool of approximately $3.5 million to be paid to customers at the end of the current financial year, 31st March 2021. The refund relates to over-recovered revenue that has been paid to the company by customers since 1st April 2020. Prices were incorrectly set higher than they should have been, equating to about 2%-4% of a customer’s total annual electricity charges.
We sincerely apologise to our customers for the errors that led to this over-charging situation. Whilst our network prices reduced on 1st April 2020 (compared to the prior year), they should have reduced more to reflect regulatory charges that were omitted. The refund will account for the impact of these omissions and reflect an accurate assessment of the over-charge applied to each customer account.
Customers should expect to see a credit reflecting their share of the refund in their April power accounts from electricity retailers. We will be writing to every customer detailing the credit they should receive in addition to any other credits applied by the company, for example, their share of the already notified discount pool . See here for more information on our Consumer Discount.
Again, we would like to apologise to our customers and we can assure you that steps have been taken to prevent this situation arising again.
Why is EA Networks refunding money to customers?
Due to errors in the way that our regulated allowable revenue was calculated, prices paid by customers were set approximately 8% higher than they should have been. Whilst our prices reduced on 1st April 2020 compared to the prior year, they should have reduced further. The refund will be paid to customers by providing a discount on prices at the end of the financial year, effectively lowering your electricity power account for March 2021.
How much is EA Networks refunding?
The omissions caused an over-recovery of revenue across 12-months of $3.3 million. To ensure that we refund at least this amount EA Networks is increasing the refund pool to a total of approximately $3.5 million.
How much refund will I get?
Your refund amount will be calculated based on the portion of our network charges that you paid across the period from 1st April 2020 to 31st March 2021. For the average residential customer the refund (paid as a discount on our prices in March) will be about $50.
Does everyone get the same amount?
No. The refund is proportional to what you have paid in network charges. It is based on each individual’s power consumption/demand or capacity measured across the period 1st April 2020 to 31st March 2021. The more you paid in network charges during that period, the more your refund will be.
What are network charges?
Your retail electricity charge is comprised of several components. About 35% of the cost of electricity relates to ‘network charges.’ These are the costs that cover EA Networks ‘distribution’ costs and Transpower’s ‘transmission’ costs. The balance of your electricity charge comprises your retailer’s margin, generation of energy, regulatory levies, and GST. The refund of over-recovered revenue from EA Networks relates only to the ‘distribution’ component of your electricity charge.
When will I receive the refund?
You should receive your refund credit (discount on prices) during April. The refund will be paid via your electricity retailer, not paid directly to you by EA Networks.
Why did EA Networks over-recover revenue in the first place?
EA Networks is regulated by the Commerce Commission. Every year we are required to forecast revenue based on the regulations. When we forecast revenue for the financial year ending 31st March 2021, we omitted two values that when combined totaled $3.3 million. Ultimately, we forecast our allowable (regulated) revenue to be $46.7 million when in fact it should have been $43.4 million.
The unit prices we charge for using our distribution network were calculated using the higher value, therefore our prices were higher than they should have been (by about 8%). The refund to customers will reduce our revenue for the financial year ending 31st March 2021 to bring it in line with what it should have been.
Will this error happen again?
We have taken this matter very seriously and put in place new internal and external (independent) checking and review procedures to mitigate the risk of this occurring again.
What about the consumer discount?
Customers’ will still be paid the Consumer Discount in addition to any refund of over-recovered revenue they may be entitled to. Refer here for more information on our Consumer Discount.
If you have any other questions in relation to this matter that we can help with, please don’t hesitate to get in touch by calling us on 0800 430 460.