This is the second regulatory period in which Transpower has had an individual price-quality path in place.

Transpower's revenue limits

We set new revenue limits for the 5 years of the regulatory period in the form of a forecast maximum allowable revenue, or ‘forecast MAR’. A key input into the forecast MAR figures for the period are the expenditure allowances we set in August 2014. Other forecast costs are used to calculate the forecast MAR figures at the start of the period; we update these revenue limits each year throughout the period to reflect the actual costs incurred by Transpower.

The forecast MAR is a significant component of Transpower’s total estimated revenue. Transpower’s total estimated revenue is derived from the forecast MAR along with the addition or subtraction of forecast voluntary revenue reductions that Transpower chooses to make, and additional 'pass-through and recoverable costs' that Transpower can't control or easily forecast.

Transpower uses total estimated revenue to set its pricing through the transmission pricing methodology (TPM). The TPM allocates how the revenue is collected from consumers and is overseen by the Electricity Authority.

Other features of Transpower's price-quality path

Other key features include:

  • incentives for Transpower to outperform its forecasts, and share efficiency gains with consumers,
  • quality standards and grid output measures that set out minimum quality of service expectations, and incentivise Transpower to efficiently maintain and invest in the grid where appropriate, and
  • additional reporting requirements to track Transpower's performance.

Transpower's price-quality path will be reset in 2019 for the next 4 to 5 year period beginning 1 April 2020.