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Next steps outlined for the Commission’s decision on Powerco’s application for $1.32 billion in lines network investment

22 June 2017

The Commerce Commission has today released a process paper detailing the next steps for assessing lines company Powerco’s application proposing price increases to meet the cost of its planned $1.32 billion investment in its electricity lines network.

Powerco is proposing significant works on its North Island network over the next five years to account for population growth as well as to replace or upgrade ageing assets including lines, poles and substations. Its planned $1.32 billion investment represents an increase of about 55% compared to what it invested in its network over the past five years.

This investment would be recovered through price increases affecting 320,000 homes and businesses in Manawatu, Rangitikei, Whanganui, Taranaki, Tararua, Wairarapa, Coromandel, Eastern and Southern Waikato and Western Bay of Plenty.

Powerco estimates its current plan would increase lines charges by 79 cents a week (up to $41 a year) for the average household. Price increases would vary across regions depending on the level of investment Powerco makes in each area.

An infographic outlining Powerco’s proposed investment can be found here.

Commission Deputy Chair Sue Begg said Powerco’s proposal represented a significant investment and it was important that consumers and other interested parties took the opportunity to have their say.

“Having received Powerco’s application we now have nine months to review its proposal and make a decision on what level of investment is in consumers’ best interests. As part of this process it is important we hear from Powerco customers, large or small, on what they think of Powerco’s proposal as our decision will affect the prices they pay and the level of quality they receive,” Ms Begg said.

“We have released today a short paper that sets out the process we will be following. Our first step will be to issue a consultation paper in August seeking public feedback, followed by a draft decision in November and final decision no later than 29 March 2018.”

A copy of the process paper can be found here

Background

Powerco owns and operates a network of power lines that deliver electricity to consumers from the national grid. It is subject to oversight from the Commission that includes regulation of the maximum prices it can charge and minimum standards of quality it must meet for the services it provides.

Currently, Powerco’s maximum prices and minimum standard of quality are set through a default price-quality path (DPP). The DPP applies to 16 electricity distributors across New Zealand and is reset every five years using generic assumptions as a relatively low-cost way to regulate these businesses.

The DPP may not suit the needs of all businesses over time however, and businesses may submit a proposal to the Commission for a CPP. Under a CPP the Commission can take into account the specific circumstances of the individual business, and will determine a new set of prices and quality standards it considers appropriate.

Once a business submits a CPP proposal, the Commission has approximately 9 months to review the proposal and make a final decision. This process involves seeking the views of consumers on the proposal and consulting on a draft of its decision on the prices and quality that will apply. This is the second application the Commission has received for a CPP. The first was from Orion following the Canterbury earthquakes.