Have infrastructure lines companies becoming bullies and price gougers?

Infrastructure lines companies are becoming a right menace to property developers and owners around Auckland and the Government needs to pay attention.

I’m reliably informed of a variety of situations that are causing grief but two main issues arise constantly, with landowners powerless to do much about it because the law is an arse.

Issue #1:

Telecoms and power companies have the legal right to install lines in the road reserve. More often than not they have no strategic plan for where cabinets and poles should be located.

Property owner comes along with a development and for one reason or another might require an adjustment to the infrastructure location. That’s dealt with under legislation that requires the entity wanting the equipment moved to pay for it to happen.

The problem is, at what cost? Developers and ordinary property owners across Auckland are complaining that the costs are extortionate and made up.

One Auckland developer told of receiving a price to relocate a chorus cabinet a distance of 1m for $78,000. When the developer decided not to bother – opting for changes to the development – Chorus came back with a new price of $16,000. That’s a $52,000 difference! An amazing difference? Or an absurdly expensive rort? This carry on is happening everywhere.

The problem comes down to cost. Sure infrastructure providers can’t guess where to place equipment but when they have to move it, do they need to be robbers dogs and grossly overcharge?   

Issue #2:

Power companies are all privately owned including Vector in Auckland, which is 74% owned by a trust and is listed on the NZX.

When developers build subdivisions they get hit with costs from lines companies like Vector for installing embedded lines, transformers and other equipment into their subdivisions, often costing into the millions.

The issue is that the developer is required to pay for the lines at all – despite that the asset those lines become, and its revenue, is passed to be owned by a privately-owned infrastructure company. It’s not going to the Council is it?

Why don’t privately-owned lines companies pay for their own infrastructure? The current situation sounds pretty cheeky to me. Logic says a business should pay for its own costs.

Does Air NZ ask ratepayers or airport owners or passengers to pay for the plane before they will fly it? No. They buy the plane and then recoup costs through regular business operations.

Developers point out that power companies should be paying for their own infrastructure – particularly if they are going to generate revenue, depreciation and issue dividends as the result of benefitting from it. Not only is it cheeky but it’s a rort!

I’ve been told that the developers also notice substantial differences in costs between what the lines companies will do the work for, and what developers can get it done for if they had the choice to do it themselves. But they are bullied into having to go with the incumbent lines company’s prices.

All of which get passed down to homeowners in the cost of sections, affecting affordability.

Of course, property developers could opt to embed and own the lines and own them forever – applying to the MBIE to register as an infrastructure company. But many also don’t see good reason why they should have to become a lines company in order to navigate the problem. That’s a different business model.

Logically, this all looks to be a hangover from when power companies were government-owned infrastructure. These days power and lines companies are essentially businesses making profits for shareholders and they should be capitalising their own growth and investing their own funds.

Subdivisions – whether greenfield or brownfield – would be more affordable without the burden of these costs.

What appears to me to be an issue is that lines companies and telecoms companies exist in a void of legislation that perhaps needs reform.

As a result they gouge costs and manage to end up owning infrastructure they didn’t pay a bean to obtain. I’d say that is something that needs fixing.

For the better good of all.

Do you want:

  • Ad-free access?
  • Access to our very popular daily crossword?
  • Access to daily sudoku?
  • Access to Incite Politics magazine articles?
  • Access to podcasts?
  • Access to political polls?

Our subscribers’ financial support is the reason why we have been able to offer our latest service; Audio blogs. 

Click Here  to support us and watch the number of services grow.

As much at home writing editorials as being the subject of them, Cam has won awards, including the Canon Media Award for his work on the Len Brown/Bevan Chuang story. When he’s not creating the news, he tends to be in it, with protagonists using the courts, media and social media to deliver financial as well as death threats.

They say that news is something that someone, somewhere, wants kept quiet. Cam Slater doesn’t do quiet and, as a result, he is a polarising, controversial but highly effective journalist who takes no prisoners.

He is fearless in his pursuit of a story.

Love him or loathe him, you can’t ignore him.

To read Cam’s previous articles click on his name in blue.