Input methodologies are the rules, requirements and processes we determine that must be applied to regulation under Part 4 of the Commerce Act. They are important as they provide increased certainty on how price-quality paths will be set for electricity lines and gas pipelines services and how information disclosure requirements will be set for electricity lines, gas pipelines and certain airport services.
Input methodologies (IMs) underpin the price-quality paths and information disclosure requirements that regulated suppliers are subject to under Part 4 and have the purpose of promoting certainty for suppliers and consumers about the rules, requirements, and processes applying to regulation or proposed regulation. Our focus in setting the IMs is to increase certainty by maintaining regulations that are stable, provide suppliers with incentives to invest in long-lived infrastructure and deliver long-term benefits to New Zealanders. IMs include important decisions on matters such as how regulated businesses' assets are valued and the values will be rolled foward over time, costs are allocated and the estimated rate of return investors will require to fund infrastructure investments.
IMs are one part of the regulatory framework we work with. They bind both us and suppliers of the regulated services. They do not take effect at the time they are determined but flow through into our price-setting processes under price-quality regulation and the information disclosure requirements regulated businesses face.
IMs were determined in December 2010 for specified airport services, electricity distribution and transmission, and gas pipelines services. The Transpower capital expenditure IM was determined in January 2012.
We are required to review each IM within 7 years of its date of publication and, after that, at intervals of no more than 7 years. The reviews were completed in December 2016 for all IMs except the Transpower capital expenditure IM review which was completed in May 2018.
Reviewing the IMs is a significant undertaking. We recognise the importance of maintaining regulations that are stable, provide incentives to invest in long-lived infrastructure and deliver long-term benefits to New Zealanders.
These reviews give us the opportunity to assess whether there are any necessary changes to the IMs to more effectively promote the purpose of Part 4, the purpose of the IMs, or significantly reduce complexity and compliance costs, for the long-term benefit of consumers. We do these reviews in consultation with all stakeholders.