The Commerce Commission has released information on the type and level of investment lines companies are making in emerging technologies.

New technologies that will benefit consumers such as electric vehicle chargers, network batteries, smart meters and solar photovoltaics (PV) are expected to present opportunities and challenges for the electricity sector in upcoming years.

Deputy Chair Sue Begg said the Commission wanted to learn more about the technologies lines companies are investing in, what impact the technologies are having on their respective networks, and how they are accounting for their investments within the current regulatory regime. The data gathered from this exercise may also help inform the Government’s electricity pricing review.

“Line companies’ investment in emerging technologies is still relatively small, and to date has been focussed on research and development. Vector is the largest investor of the lines companies, devoting about 5% of its overall regulated expenditure to emerging technologies compared with the industry average of 1%. As this expenditure is still embryonic, we have not yet formed views on how these investments might be affecting competition in markets adjacent to electricity networks,” Ms Begg said.

“As you would expect, there is strong interest in electric vehicle (EV) chargers with $5 million invested to date in this technology. But there is uncertainty about the impact EVs will have on networks in the near future and the ability of lines companies to manage increased loads. This will depend on the pace of technological advancement in terms of battery range and charging speed, as well as the affordability of EVs for New Zealanders.

“From the information we’ve gathered it’s also apparent that some lines companies are unsure about how to treat their investments under the current regulations. We believe some may be inappropriately recovering the cost through their existing regulated services and we will be seeking to better understand the reasoning for the approaches they have taken.”

The Commission’s report was compiled through an information request to lines companies across the country.

An infographic highlighting some of the key investments, as well as the full dataset, can be found on the Commission’s website.

Background

In May 2018, the Commission published an open letter outlining its intention to gather information from lines companies to better understand how they are planning, investing and accounting for emerging technologies.

The letter also reminded lines companies about:

• how emerging technology costs and revenues should be accounted for in order to comply with their regulatory requirements, including new guidance on when investments in electric vehicle chargers can be included in their regulated asset
• their obligations under Part 2 of the Commerce Act to ensure they do not enter into agreements which will substantially lessen competition, or take advantage of market power for an anti-competitive purpose in unregulated and competitive energy services markets they are seeking to enter or already participate.

Following the open letter, in July we requested information from all lines companies relating to their emerging technology activities. This information was sought to improve our understanding of:

• lines companies’ ability to understand and manage potential changes in peak demand from emerging technologies
• how lines companies have accounted for their emerging technology investments, including understanding how lines companies have allocated costs and revenues associated with related investments.

The open letter and information request can be found here.

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