Powerco’s customised price path

Electricity distribution businesses play a key role in ensuring New Zealanders have reliable and safe access to electricity. We have a number of regulatory responsibilities in the sector.

As well as setting up-front rules, requirements and processes for regulation (collectively known as input methodologies), we also set price-quality paths for 17 electricity distribution businesses. These paths limit the maximum revenues and set the minimum quality standards for these businesses.

There are two types of price-quality paths that suppliers can have. We set a ‘default’ path for all businesses, which is the more generic and lower cost option. Any business then has the option to propose a ‘customised’ path (or CPP) to better meet its circumstances.

Powerco’s CPP

Powerco has announced that it will apply for a CPP to enable a $1.4 billion network upgrade over 5 years beginning April 2018 – an increase of about 50% compared to the previous 5 years (FY14-18). They have said that this upgrade will allow it to replace 27,500 poles and 1,600 kilometres of overhead lines, as well as invest for customer growth and increased operating expenditure.

We are expecting Powerco’s application in June. We will then work to assess its proposal and set the price-quality path. After Powerco submits its application, we will notify stakeholders and advise of our process, including how consumers and other interested parties can provide their views on Powerco’s proposal and our assessment. If you wish to be sent our stakeholder update emails, please email regulation.branch@comcom.govt.nz.

Focus of our assessment

Put simply, our assessment will look at whether Powerco is making the right investments, at the right time, and at the right cost based on what consumers value. Proposals will take different shapes and have different drivers, so we intend to focus on what is material and will have the largest impact on consumers. This involves assessing several factors, including the consistency of underpinning information and assumptions, and the extent to which the proposal is supported by consumers.

Engagement with intending CPP applicants

In preparation for receiving Powerco’s application, we’ve been in discussions with them on how the process works and to help clarify the rules relating to CPPs. We see engaging upfront with potential applicants as an important feature of the CPP process to help ensure it works for the different types of applications we could receive.

We encourage any supplier considering a CPP application to contact us as early as possible to discuss what options might be available to them.