Commerce Commission On Transpower

Commerce Commission releases draft decisions on Input Methodologies for Transpower

The Commerce Commission has today published the fourth in a series of papers important to the development of input methodologies for regulated industries under Part 4 of the Commerce Act. It has released a paper setting out its draft decisions and reasons on the input methodologies to be applied to Transpower, and will publish its draft decisions and reasons on the application of individual price-quality regulation of Transpower on Monday 28 June 2010.

The purpose of input methodologies is to promote certainty for suppliers and consumers in relation to the rules, requirements and processes applying to the regulation, or proposed regulation, of goods or services under Part 4.

The key draft decisions the Commission has made in relation to input methodologies for Transpower are:

fixed assets used solely for the purposes of providing the system operator services are to be excluded from Transpower’s regulatory asset base (RAB), and any costs recovered through the system operator service provider agreement are to be excluded from any operating or capital expenditure forecasts used to determine Transpower’s individual price-quality path;

the initial value of the RAB should be the RAB determined under the settlement agreement as at 30 June 2011;

Transpower’s RAB must be rolled forward for Commission-approved capital additions, and depreciated on a straight-line basis, without indexation;

Transpower’s tax obligations must be estimated using a ‘tax payable’ approach; and

the Commission will produce and publish vanilla and post-tax cost of capital estimates of a five-year term for Transpower on an annual basis using the Simplified Brennan-Lally model.

“Today’s paper represents another significant step forward in the development of the regulatory framework for Transpower, which will, in the long-term, provide greater certainty for Transpower and its consumers” said Commerce Commission Chair Dr Mark Berry.

Submissions on the draft decisions are due by 6 August 2010.

The paper Input Methodologies (Transpower) Draft Reasons Paper can be found at www.comcom.govt.nz/input-methodologies/

ENDS

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