Improvements to the rules for Transpower's investment

Improvements to the rules for Transpower's investment in the national grid

The Commerce Commission has today released its final decision on its review of the rules relating to Transpower’s investment in the national grid.

Commission Deputy Chair Sue Begg said the rules remain largely fit for purpose, with only targeted changes needed.

“Our review makes a small number of substantive changes, as well as some minor changes to simplify the rules, which will ultimately benefit consumers,” Ms Begg said.

As a monopoly supplier of electricity transmission services, Transpower is subject to price-quality regulation and must seek the Commission’s approval for its capital expenditure before it can recover the cost of its investments from consumers.

“Reviewing these upfront rules was a significant undertaking and we recognise the importance of maintaining rules that are stable and provide appropriate incentives for Transpower to make the right investments, in the right place, at the right time,” Ms Begg said.

“As part of the review, we have decided to introduce a more flexible staged approach to approvals for major transmission projects. This will allow Transpower to seek approval to undertake the initial stages of a project, such as acquiring access to land needed, before seeking approval for the later stages of the project once the need, timing and cost of the project become clearer.”

The final decision on the Transpower Capital Expenditure Input Methodology (Capex IM) can be found on our website.

Alongside our decision, we have published a revised draft amendments determination, which shows how we propose to give effect to our decisions. Submissions on the revised draft determination can be made by email to regulation.branch@comcom.govt.nz by 5pm on 24 April 2018. We expect to release our final determination by the end of May 2018.

Background
Transpower
Transpower is a State-Owned Enterprise that owns and operates the national high voltage electricity transmission network. As system operator, it also manages the real time coordination of the electricity market. As a monopoly supplier, the revenue it earns and the quality standards it must meet are regulated under Part 4 of the Commerce Act.

Capex IM
The rules relating to Transpower’s capital expenditure are set out in the Transpower Capital Expenditure Input Methodology (Capex IM) Determination. The Capex IM requires Transpower to seek the Commission’s approval of its capital expenditure proposals before recovering the cost of its investments from consumers. The Capex IM was set in 2012 and we were required to review it within 7 years.

Input Methodologies (IMs)
Input Methodologies are the upfront rules, requirements, and processes that apply to utility regulation in New Zealand. The IMs are an input and only one part of the regulatory regime, with benefits delivered to consumers through the application of the IMs to price-quality regulation and/or information disclosure regulation. The influence of the Capex IM review on the price and quality of service consumers receive will not be seen until the next price path for Transpower comes into effect on 1 April 2020.

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