Commerce Commission sets revenues for Transpower for the three years from mid-2012
Published01 Nov 2011
The Commerce Commission today announced the forecast maximum revenues that Transpower is able to earn for the three year period from April 2012.
The Commerce Commission today announced the forecast maximum revenues that Transpower is able to earn for the three year period from April 2012.
The revenues determine the total amount Transpower can charge its customers, namely power companies and large electricity users. Overall, the figures announced today are significantly higher than previous years with the 2012/13 revenue allowance being 21.7% higher than the current revenue allowance.
This increase reflects the amount of investment in critical infrastructure planned by Transpower. In 2012/13 alone, Transpower is forecasting $1.5 billion of capital expenditure, compared with $349 million forecast for the current year. Examples of large capital expenditure projects planned by Transpower are the HVDC (high voltage direct current) Pole 3 and the North Island 400kV Grid Upgrade.
"Giving Transpower the ability to recover the investment in its capital expenditure is vital to ensuring sustainable infrastructure in New Zealand. We are always conscious of balancing the need for investment with the likely impact on consumer prices. While we anticipate higher prices for consumers as these costs are passed on, we think we have got that balance right," said Dr Mark Berry, Chair of the Commerce Commission.
The Commission has approved the following revenues for Transpower:
$783.8 million (2012/13)
$906.4 million (2013/14)
$958.9 million (2014/15)
"We have conducted a detailed review of Transpower's expenditure forecasts and work programme and consider these revenues provide the right balance of incentives for Transpower to constrain price increases, maintain reliability, and improve overall reliability performance. We are working closely with Transpower and have required them to regularly report on a number of business improvement initiatives," said Dr Berry.
Transpower is the sole owner and operator of the New Zealand national electricity transmission grid.
Since April 2011, Transpower has been regulated under Part 4 of the Commerce Act by way of individual price-quality regulation. The individual price-quality path governs Transpower's maximum revenues for each pricing year, with the paths being reset either every four or five years.
Under individual price-quality regulation, the Commission will, for each regulatory control period, set an approved level of operating expenditure and capital expenditure to apply to Transpower.
In order to set a maximum allowable revenue for Transpower for each year of a given regulatory control period, the Commission specifies the levels of operating expenditure and capital expenditure.
Transpower's revenue forecasts are based on capital expenditure already approved by the Commission or previously by the Electricity Commission. The revenue forecasts do not anticipate future approvals of new projects. Future capital expenditure approvals will be dealt with through future updates to the allowable revenues.
Transpower is also required to provide forecasts of the operating expenditure it considers necessary. The Commission reviewed Transpower's level of proposed operating expenditure, and after forming its own view and consulting on this, published its final decision.
After taking into account all feedback received during consultation, the Commission makes a final determination when calculating the forecast maximum allowable revenues to apply. These reviews occur prior to the start of each regulatory control period.
