In contrast to the opening day's submissions by Vector-UNL, New Zealand's largest lines company, the Major Electricity Users Group yesterday said it supported the commission and even urged it to extend the time period to assess any "excessive" profits made by lines companies.

Executive director Ralph Matthes said MEUG believed three lines companies had overcharged major users by a total of $NZ275 million over two years. United Networks Ltd's excess charges were $NZ184 million in the two years to March 31, 2002, making excess profits of $NZ123 million. Vector had overcharged $NZ37 million for excess profits of $NZ25 million and Orion had overcharged $NZ54 million with excess profits of $NZ36 million.

MEUG had based the calculations on the companies having a cost of capital of 6.2%. Government-owned national grid operator Transpower's excess profits had been $NZ126 million to date, since it was split off from State-owned ECNZ.

Matthes suggested these excess charges could be returned to customers through single big one-off decreases or reductions spread over five years.

MEUG supported the commission's proposed regulatory regime for lines companies and Transpower, which will force the companies to drop their charges by X% a year for five years. It expected the price reductions to flow transparently to consumers.

MEUG said the "X" price reductions for Transpower should be 5% and that distributors should have only two categories, 5% and 7%.

The group also said the accumulated economic gain payable to Transpower customers at 30 June 2002 (equivalent to about a one-off reduction in line charges of $189m) needed to be accommodated in the design of the thresholds otherwise it would be lost to consumers.

Counsel Paul Harper said MEUG disagreed with suggestions that the proposed threshold regime amounted to price control and wanted the commission to extend the time period to assess any excess profits of lines companies to seven years by including the profits of 2002 and 2003.

While MEUG's presentation to the commission took 1.5 hours, the second biggest lines company Powerco wheeled in some top lawyers and consultants and took twice as long to tell the commission what it thought of the proposed regulatory regime.

Counsel Tom Weston QC said the commission was moving too quickly and that Powerco and other lines companies had not had sufficient time to respond to the substantial changes in the commission's stance over the past two months. Powerco wanted more detail on the commission's criteria for the 1%, 3% and 5% groupings, which it believed were so low that a number of lines companies would end up breaching them.

Weston said the commission placed a lot of emphasis on "excessive" profits, but that did not mean the companies could not make a profit in excess or above a certain level. Powerco believed lines companies should be able to make a return 2-3% above their weighted average cost of capital.