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Proposed approach to assessing Wellington Electricity’s plan to spend $31 million on earthquake resilience

17 November 2017

The Commerce Commission has today released a paper explaining its proposed approach to assessing Wellington Electricity’s plan to spend $31 million to improve its network’s ability to respond to a significant earthquake.

It follows a Government Policy Statement (GPS), issued on 18 September 2017, which outlines the expectation that the Commission considers options to allow Wellington Electricity to recover resilience-related expenditure that was not anticipated when its price-quality path was set in 2015.

“The Kaikoura earthquakes highlighted Wellington’s vulnerability and the need for lifeline utilities like Wellington Electricity to be able to function to the fullest extent possible during and after a disaster,” Commission Chair Dr Mark Berry said.

“This paper sets out our proposed approach to use the flexibility in our regulatory regime. In light of the importance and urgency of the issue, we intend to proceed with a streamlined ‘customised price path’ process to assess Wellington Electricity’s plan to invest in earthquake-strengthening its substations and purchasing equipment for use in emergencies.”  

“It is important that Wellington, as New Zealand’s second largest metropolitan area and the home of central Government, is adequately prepared for a significant earthquake. Our proposed approach would enable this.”

Submissions on the Commission’s proposed approach can be emailed to regulation.branch@comcom.govt.nz with ‘Wellington Electricity earthquake resilience’ in the subject line. Submissions close on 28 November 2017.

The proposal paper can be found on our website.

Background

Wellington Electricity

Wellington Electricity manages the poles, wires and equipment to deliver electricity to approximately 166,000 homes and businesses in Wellington, the Hutt Valley, and Porirua. As the only electricity distributor in these regions, the Commission regulates the maximum prices Wellington Electricity can charge and minimum quality standards it must meet through a default price-quality path (DPP). However, in applying for a customised price-quality path, the Commission must take account of their specific circumstances to determine a new set of prices and quality standards. More information about customised price-quality regulation can be found on our website.

Government Policy Statements (GPS)

A GPS is not a direction by Government. However, under Section 26 of the Commerce Act, the Commission must have regard to it, subject to our overall requirement to promote the long-term benefit of consumers under Section 52A of the Commerce Act.