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Asset management of electricity distributors key focus for Commission

9 November 2017

The Commerce Commission has today published an open letter outlining how asset management is a key priority for the Commission’s work in the electricity distribution sector over the coming year. 

Asset management was signalled as a focus area at the Commission’s annual stakeholder briefings in September, with today’s letter providing more details.

“Focusing on asset management of regulated energy suppliers is the logical next step now the upfront rules, processes, and price-quality paths are bedded in,” Commission General Manager of Regulation Nick Russ said.

“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’ve also launched a new online tool 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.

The Commission welcomes feedback on the open letter and online tool to by the end of the year.


Regulation of electricity distribution businesses

As monopoly utilities, all 29 of the country’s electricity distribution businesses are regulated by the Commission under Part 4 of the Commerce Act. The aim of this regulation is to ensure they have similar incentives and pressures to those operating in competitive markets to innovate, invest, and improve their efficiency. Each distribution business is required to publicly disclose information on its performance. 17 of the 29 also have revenue limits and quality standards set by the Commission. Revenue limits determine the maximum revenue the company can collect from customers to limit their ability to earn excessive profits, while minimum quality is measured in power outages. If a business breaches its quality standards (eg, asset degradation leads to more outages on its network than is allowed), it may face prosecution under the Commerce Act. The remaining 12 distribution businesses are exempt from price-quality regulation as they are consumer-owned.