Infratil's decision to register four key bus services as commercial - which require no regional council subsidy - is being described by the Green Party as the actions of a "virtual monopoly" trying to undermine a new tender process.
But Infratil says it will save the Greater Wellington Regional Council (GWRC) $2.5 million a year, making it a win-win for passengers, ratepayers-taxpayers and its own operation.
Two of the services (Queensgate to Stokes Valley and Petone to Upper Hutt) are contracted services which means they attract a GWRC subsidy.
A third proposed commercial service replaces contracted weekend and night-time services between Wellington and Eastbourne. The fourth is a new route from Johnsonville via Khandallah to Victoria and Massey Universities.
Until now, GWRC has set contracts on a route-by-route basis. But a change to legislation introduced last year means that it is possible to bundle sets of public transport routes into a contract.
That's likely to cause competition among bidders, thus driving down the overall level of subsidy required.
GWRC is about to release contracts for bus routes in the Hutt Valley on this new basis. The contracts will be for eight years, with an option for renewal for a further four years, the long guaranteed period being another incentive for an operator to sharpen its price.
According to a GWRC report, there had been steady bus patronage growth up until 2006 but since then, user numbers have been static of declining, despite higher costs of using private cars, petrol, etc. Bus customer satisfaction levels have also slipped 5 per cent since 2003.
''Information on the operational performance of Wellington's bus services is generally acknowledged by all parties to be unsatisfactory,'' the report says.
Services are dominated by the ''big two'' Infratril's NZ Bus Ltd (Go Wellington, Valley Flyer) and Mana Coach Services account for 98 per cent of the market with NZ Bus being by far the bigger of the two.
A High Court finding from 2006 was that while there was genuine interest from other operators to bid for services in this region, current contracts were too small in size and too short in duration.
A nationwide benchmarking exercise found that contracts involving more than one bidder are 15-20 per cent lower than with a single bidder (97 per cent of Wellington's contracted services attract a single bid).
''While it would be simplistic to conclude that competition for all contracts would reduce prices to this extent, the information does indicate that competition would generate significant downward pressures on prices in Wellington,'' the GWRC's report says.
A switch from net to gross contracts, as the GWRC is now proposing in the Hutt Valley, could enable the council to make savings of up to $4m-$5m each year.
Greens former co-leader Jeanette Fitzsimons says Infratil's registration of the two Hutt Valley commercial services on the eve of introduction of the new system here is ''cherry picking'' of the plum routes.
''They've busted open the contract and made it much less likely there will be a competitive tender for the rest of it.''
While it might initially appear to be a saving for GWRC, with two services no longer needing any subsidy, she says the subsidy required for remaining services with those two prime, well-patronised routes out of the equation, ''are likely to be higher''.
NZ Bus CEO Bruce Emson says the company is making these registrations now ''because of a very narrow window of opportunity''.
''Uncertainly around the [Public Transport Management Act] and regulatory framework has made it difficult to contemplate registration of these services until now,'' he said.
It's regrettable the Hutt Valley tender process is proceeding before the revised legislation is in place.
''We do not want to disrupt the GWRC's tender process, and have chosen to register the two services in their totality, seven days a week, even though this has meant incorporating the unprofitable 'tail' of each service in the registration.
''This means the GWRC will be able to proceed without delay to call tenders for the remaining services ...
He says NZ Bus will ''vigorously compete'' for contract tenders when they are advertised. The commercial registrations are for three years, and Mr Emson says it will take that long to turn them into profit through investment, innovative marketing and excellent service delivery.
Despite the GWRC's 2008 report warning that registration of commercial services could be used as a tactic to disrupt the bundled route approach, Transport and Access Committee chairman Peter Glensor says the registrations are legal, and there are very limited grounds on which the council can decline them.
There is an ''over tender'' process that could override the commercial registration, ''but I don't think it's 'top of the pops' in terms of the way ahead'', Mr Glensor said.
There will be some subsidy for the two Hutt Valley routes, with GWRC picking up the cost of ticket concessions and the taxpayer picking up the cost of SuperGold travellers.
New tenders for Hutt Valley services are expected to be ready in about six weeks.
Greater Wellington Regional Council is targeting 50 million public transport trips (trains, buses, harbour ferry) a year by 2016-17. The 2007-08 'actual' number of trips was 34.7 million.
Achieving the target will require patronage to increase at an average rate of 4.7 per cent a year, per annum, significantly higher than the 3.3 per cent it has tracked at in the recent past.
The target splits these trips into 25 million peak journeys and the same number of ''off peak'' journeys.