2023 Input Methodologies Review

What are the input methodologies (IMs)?

The IMs are the rules and processes that we set upfront to help provide certainty about how we will regulate specific services under Part 4 of the Commerce Act (Part 4). The IMs apply to key components of the regulatory regime such as how we value assets, allocate costs, share risk between businesses and consumers, and determine how businesses are compensated for their investments. We must apply the IMs when setting price-quality paths and determining information disclosure (ID) requirements.

Why did we review the IMs?

The IMs were first determined in 2010 and must be reviewed at least every 7 years under Part 4.

When did we last review the IMs prior to 2023?

The last IM Review was largely completed in December 2016, although some elements were completed later as allowed for under Part 4. Documentation from the 2015/16 review, including the consolidated reasons papers was published on 20 December 2016.

What was the process for this review?

We formally began the current review on 23 February 2022 by issuing the required notice of intention. We issued an amended Notice of Intention on 1 March 2023 and a further amended Notice of Intention on 22 August 2023.

We completed the current review on 13 December 2023. Last time, some IMs were reviewed on different timelines as they had been determined at different times and had longer on the 7-year review cycle to run. This time, we aligned the review of all Part 4 IMs to run on the same 7-year review cycle.

Update on the IM Review

• Stakeholder slides for 13 December 2023 IM Review Final Decisions pdf, 1.1 MB

Submissions to our draft decisions were published on 26 July 2023. Cross submissions on our draft decisions were published on 22 August 2023. On 24 August 2023 we invited cross submissions on specific parts of an expert report provided at the cross-submission stage of the IM Review 2023. We published all cross- submissions received for this specific matter on 19 September 2023.

On 20 October we published submissions on two proposed changes to a draft decision we made on the cost of debt wash-up for electricity distribution and gas transmission businesses, and the way it interacts with the overall wash-up for inflation during the regulatory period. Cross submissions were published on 2 November.

On 2 November 2023, we also published submissions on a change we are proposing to the effective dates in our [Draft] Airport Services Input Methodologies (IM Review 2023) Amendment Determination 2023 (draft Airport IM amendment determination) published with our draft decisions on 14 June 2023.

Our final decisions were published on 13 December 2023.

Process

In 2022, we sought to establish the key issues the IM Review should address and develop our thinking on how these relate to the IMs specifically and what the options might be for addressing these issues. During 2023 we narrowed down these options further and set out our draft changes to the IMs arising from our review. We finalised these changes after feedback.

Decision-Making Framework paper

On 13 October 2022 we published our Decision-Making Framework paper, which can be found under the 'Document' tab below. This took into account the submissions received on the draft Decision-Making Framework paper.

The Decision-Making Framework paper describes the framework we applied in reaching our decisions in the IM Review. It has two main components:

• the Decision-Making Framework, which describes how we will decide whether and how to amend the IMs
• the key economic principles, which provide guidance as to how we might best promote the purpose of Part 4 under section 52A of the Act.

The framework also notes that we can have regard to section 5ZN of the Climate Change Response Act 2002, including the 2050 net zero carbon target, where consistent with promoting the section 52A purpose of Part 4. We also published a clarification note confirming what we mean by ‘consistent with promoting the section 52A purpose’.

Where to find the IMs that currently apply

The IM determinations for each sector that currently apply are available on the individual sectors' pages below. These determinations are ‘consolidated’ versions incorporating all amendments made prior to the 2023 IM Review. The updated ‘consolidated’ versions, including the applicable amendments made as a result of the 2023 IM Review, will be published on these pages early in 2024.

• Airports
• Electricity distribution
• Gas pipelines
• Transpower

Contact

If you have any questions about the IM Review, please email infrastructure.regulation@comcom.govt.nz