There are currently no customised price-quality paths in place for gas pipelines businesses.
We can set a customised price-quality path (CPP) to better suit the specific needs of a regulated business and those of its consumers.
Each gas pipeline business can apply for its own CPP, as a more tailored option than the default price-quality path (DPP). For example, if a business needs to invest more in its network than provided for under the DPP. Customised price‐quality paths are based on our analysis of information specific to the business, and require in‐depth audit, verification, and evaluation of the information provided by the regulated business.
What is a CPP?
Gas pipeline businesses initially start on a DPP, which relies on relatively low cost approaches for setting price or revenue limits and minimum standards for quality of service. If a business believes the default path does not meet its needs, particularly in terms of future investment requirements, it can apply for a CPP. A customised path is tailored to the company's specific plans and requires us to complete a detailed assessment of its proposal before making a decision on what its price path and quality standards should be.
How do businesses apply for a CPP?
The rules and processes for a CPP proposal, including the requirements for a proposal and the criteria we must consider when evaluating a proposal, are set out in input methodologies that we have developed. Input methodologies are rules, processes, requirements and evaluation criteria for services that are regulated under Part 4 of the Commerce Act.
When can a proposal be submitted?
Gas distribution and transmission businesses can submit a customised price-quality proposal to us at any stage but should contact us prior to doing so.
What does a proposal need to include?
The information an applicant must provide when proposing a CPP is set out in the input methodologies. This includes:
the reasons for the proposal
the duration of the CPP the applicant is seeking (if less than 5 years)
financial and other relevant information (such as forecast capital and operating expenditure) to allow us to assess an appropriate price path
an audit report and certification from the directors confirming the information provided within a proposal is accurate
an independent expert’s opinion verifying the contents of the proposal and the reasonableness of the assumptions and methodologies used.
Before formally submitting a proposal, a business will provide a summary of the expected proposal, and consult with consumers about the changes it is proposing. In its application it must provide evidence of consultation with consumers, a description of all issues raised and an explanation of whether its proposal accommodates these issues and if not, why not.
There is a standard application fee of $20,000 that must be paid by all applicants at the time they submit their proposals to us. The fee is intended to be a part payment for costs that we will incur for assessing the application and setting a CPP.
