Commission gives Transpower approval to recover costs of developing new transmission pricing methodology (TPM)
Published07 Oct 2021
The Commerce Commission has allowed Transpower to recover the approximately $5 million it has spent so far in developing a new transmission pricing methodology (TPM).
In doing so, the Commission has amended Transpower’s individual price-quality path (IPP), which establishes the maximum revenues that Transpower may recover from its customers for its electricity transmission services, as well as the minimum quality standards it must meet in supplying those services.
The Electricity Authority asked Transpower, the operator of the national electricity grid, to develop the new TPM after it published new transmission pricing guidelines last year. The Electricity Authority then asked the Commission to reconsider Transpower’s IPP in respect of the costs of developing the TPM according to the new guidelines.
The Commission determines Transpower’s IPP under Part 4 of the Commerce Act 1986. Transpower’s expenditure on the TPM was not included in the operating expenditure allowance under its IPP for the 1 April 2020 to 31 March 2025 regulatory period because the timing and cost of this expenditure were not certain when the Commission set the IPP in 2019.
The Commission received five submissions during consultation on its draft decision to reopen the IPP to allow Transpower to recover the TPM costs in its price path for the next regulatory period starting on 1 April 2025. All were generally supportive of Transpower recovering the TPM costs. Having considered those submissions, the Commission finalised its draft decision.
The submissions, along with the Commission’s final decision, are available on the Commission’s website.
There will be further implementation costs for the new TPM. These will be considered for approval separately by the Commission when there is greater certainty on those costs.