vic electricity rates reduced from 1/1/06

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    Just in time for the summer air conditioning bills.

    Singapore Power, Cheung Kong Must Cut Victorian Rates (Update2)

    Oct. 19 (Bloomberg) -- Singapore Power Ltd., Cheung Kong Infrastructure Holdings Ltd. and rival power distributors in Australia's Victoria state must cut tariffs by as much as 16.4 percent under a regulator's ruling, less than earlier proposed.

    Five distributors in the country's second-most populous state will have to make average real price reductions of between 3.1 and 16.4 percent in the year beginning Jan. 1, Victoria's Essential Services Commission said today in a statement. More cuts are proposed in the four subsequent years.

    A draft decision on the tariffs, released in June, proposed average reductions of between 14 percent and 26 percent next year. The regulator reviews and decides on price controls and spending limits for Victoria's power distributors every five years. Its latest review comes before planned share sales by Singapore Power and Cheung Kong Infrastructure's Australian units.

    The final ruling ``is better than we expected,'' said Michael Smiddy, a utilities analyst at Commonwealth Securities Ltd. in Melbourne. ``Most of the five will be happy with the outcome, so there might be fewer appeals now than there would otherwise have been.''

    Australian Gas Light Co., the nation's biggest energy retailer, Diversified Utility & Energy Trusts and Alinta Ltd. also own or have stakes in power distributors covered by the ruling.

    AGL Shares

    Shares in Sydney-based Australian Gas rose as much as 12 cents, or 0.8 percent, to A$14.64 on the Australian Stock Exchange after trading as low as A$14.30 before the ruling was released. The shares were at A$14.60 at 11:54 a.m. Sydney time.

    Diversified Utility, or DUET, which owns 66 percent of United Energy Distribution Pty., one of the distributors covered by the ruling, said the final decision ``is a substantial improvement'' on the draft.

    ``In particular the Essential Services Commission has revised its position on volume growth rates and capital expenditure requirements,'' DUET said. ``This will enable United Energy Distribution to continue to improve its service to customers in the future.''

    Shares in DUET fell 4 cents, or 1.5 percent, to A$2.60 on the Australian Stock Exchange at 12:02 p.m. Sydney time, after falling as much as 3.4 percent before the decision was released. Shares in Perth-based Alinta rose 1 cent, or 0.1 percent, to A$10.61 at the same time after earlier falling as much as 2.4 percent.

    Li Ka-shing

    The regulator ordered an average cut in tariffs of 16.4 percent for Powercor Australia Ltd. and of 7.7 percent for CitiPower I Pty., which are both jointly owned by Cheung Kong Infrastructure, a roads and utility company owned by billionaire Li Ka-shing, and Hongkong Electric holdings.

    Shares of Cheung Kong Infrastructure, which derives 33 percent of its profit from Australian investments, fell as much as 3 percent. The stock traded at HK$24.6 at 10:52 a.m. in Hong Kong, down 1.6 percent. Shares of Hongkong Electric declined 0.9 percent to HK$36.85, having earlier lost as much as 1.5 percent.

    Singapore Power's SP AusNet unit needs to cut tariffs an average 7.8 percent next year, while Australian Gas, or AGL, needs to cut tariffs 3.1 percent. United Energy Distribution, owned jointly by DUET and Alinta, needs to cut tariffs next year by 15.6 percent.

    In the draft, Powercor needed to cut charges by 26 percent, United by 23 percent and CitiPower by 22 percent, while smaller tariff reductions were proposed for Australian Gas and SP AusNet.

    Bolstering Spending

    ``The AGL and CitiPower improvements are the largest,'' Smiddy said.

    The regulator's ruling provides for capital spending of A$3.3 billion ($2.5 billion) and operating expenditure of A$2.3 billion over the five years ending Dec. 31, 2010, to maintain and improve the reliability of the state's power supply. In the draft, it allowed for capital spending of A$2.9 billion and operating expenditure of A$2 billion.

    The extent of tariff cuts has ``been relaxed to bolster the level of capital, operating and maintenance expenditure invested in the Victorian electricity distribution system,'' Bob Scott, commissioner of the regulator, said in the e-mailed statement.

    Singapore Power plans to raise about A$1 billion selling shares in SP AusNet as early as October, bankers familiar with the offer said in July.

    Cheung Kong Infrastructure hired Deutsche Bank AG to sell at least A$1 billion of shares in its Australian energy business as early as this year, people familiar with the plan said in August.
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