Process for setting Powerco’s electricity revenue to 2025 gets underway
Published26 May 2022
The Commerce Commission is inviting feedback on key issues as part of the first stage in the transition of Powerco Limited (Powerco) from a customised price-quality path (CPP) to the default price-quality path (DPP). A price path sets the maximum revenue a regulated lines business can recover and the minimum quality of service it must deliver.
Powerco is one of two electricity distribution businesses (EDBs) in New Zealand on a customised price-quality path. Other price-quality regulated EDBs are already on the 2020-2025 default price-quality path (DPP3). Powerco’s CPP expires on 31 March 2023, when the company will move to DPP3 for the final two years of the DPP3 period.
The process and issues paper published today sets out the timeline for the Commission’s process to transition Powerco to the DPP and key issues the Commission is considering.
The Commission is particularly interested in hearing from stakeholders about the key issues – such as its approach to setting revenue allowances, and revenue smoothing to avoid potential price-shocks – and any others they think may be relevant.
Feedback from stakeholders will inform the Commission’s draft decision on the transition, which will be released later this year for consultation.
Under Part 4 of the Commerce Act, the Commission regulates monopoly infrastructure providers, including price-quality regulation of 16 local electricity lines companies, to ensure they deliver services at cost-reflective prices and at a quality that consumers demand.
The Commission’s price-quality regulation sets rules about how much the lines companies can earn from their consumers and the minimum reliability standards they must deliver.
For most price-quality regulated electricity lines companies this is done under a DPP which is a relatively low-cost regulatory regime that might not meet the exact needs of the lines company. Where, for example, more significant infrastructure investment might be needed, the electricity lines company can apply for a CPP as an option to better suit its specific circumstances.
Powerco’s CPP In March 2018, the Commission approved $1.27 billion of spending to allow Powerco to undertake a major network upgrade to replace ageing parts of its network and respond to strong population growth.
The other lines company on a CPP is Aurora Energy.
