Are there too many electricity distributors?
A long-standing debate in the New Zealand electricity sector is whether the country has too many electricity distribution businesses (EDBs). In our recent report looking at the potential benefits from amalgamation of the current 29 EDBs, we found that amalgamation is no silver bullet for improving the efficiency of the lines companies. Our analysis found that customer density, not size, is the biggest driver of EDBs’ asset operating costs and found only small gains attributable to increasing scale. This suggests that the gains from amalgamation would probably be quite limited.