Busy end to the year in electricity distribution regulation

It’s been a busy final quarter in electricity distribution regulation.

It’s been a busy final quarter in electricity distribution regulation.

We currently have two customised price path (CPP) applications underway for electricity lines companies Powerco and Wellington Electricity.

In November we released our draft decision on Powerco’s proposal for a major network upgrade. We accept the company is facing significant challenges as a result of a network built in the 1950s and 60s nearing the end of its life and under increasing pressure from powering regions with strong population and economic growth such as Tauranga.

Our draft decision proposes to allow Powerco to spend $1.27 billion over the next 5 years and to recover this increased spending from consumers over the longer term. This increase in spending would raise the average residential monthly electricity bill by about $2.70 in the next 5 years, and an additional $6 in the longer term if current demand and investment forecasts eventuate.

The Commission is conscious of keeping electricity affordable. However, long-lived assets like electricity networks require significant upfront investment, with the full costs recovered over their expected lifetime. We believe maintaining a safe, secure and resilient network is in the best interests of today’s consumers, as well as future generations.

We’re also in the process of reviewing a CPP application from Wellington Electricity to spend $31 million earthquake-strengthening its substations and purchasing equipment for use in emergencies.

It follows the issuing of a Government Policy Statement (GPS) which outlines the expectation that the Commission will consider options to allow Wellington Electricity to recover resilience-related expenditure that was not anticipated when its price-quality path was set in 2015.

On December 6, we invited public submissions on Wellington Electricity’s proposal and outlined that we intend to proceed with a streamlined CPP to assess their investment plan.

We expect to release our draft decision by 1 February 2018.

More broadly in the electricity distribution sector, in November we released an open letter outlining how asset management is a key priority for the Commission’s work in electricity distribution over the coming year.

We believe this is the logical next step now the upfront rules, processes, and price-quality paths are bedded in. It’s increasingly important that electricity distributors prioritise investment and maintenance of their assets to ensure their networks provide the reliability, safety and resilience consumers expect.

This priority is about us becoming increasingly proactive in working with electricity distribution businesses to ensure we and other stakeholders understand the extent to which electricity distributors are investing appropriately in their networks and managing them well.

We also recognise that sunlight is a powerful tool for incentivising good performance, which is why in conjunction with the open letter, we launched a new online tool, utilising Tableau data visualisation software, to help make performance information about electricity distributors more accessible.

The data visualisation tool can be found here.

The open letter can be found here.

We welcome your feedback on the open letter and online tool to regulation.branch@comcom.govt.nz by the end of the year.