The Commerce Commission today released its determination specifying the weighted average cost of capital (WACC) for regulated services under Part 4 of the Commerce Act 1986. These regulated services are electricity lines services, gas pipeline services, and specified airport services supplied by the companies operating Auckland, Christchurch and Wellington International Airports.

"These WACCs are in accordance with input methodologies, which the Commission finalised in December 2010. We made sure that our methodologies produced commercially realistic WACC estimates. Most WACCs will be re-estimated annually to reflect changes in market interest rates," said Dr John Hamill, Commerce Commission General Manager Regulation.

The Commission developed a number of WACCs because they apply to different services and types of regulation. The determination and explanatory note can be viewed on the Commission's website at www.comcom.govt.nz/cost-of-capital

Background

The cost of capital is the expected rate of return that businesses require on their investments in order to compensate them for the risks that they bear.

Part 4 of the Commerce Act regulates suppliers of electricity lines services, including Transpower New Zealand Limited, gas pipeline services and specified airport services supplied by Auckland, Wellington and Christchurch airports.

Input methodologies involve setting upfront regulatory rules, processes and requirements that apply to the regulatory instruments under Part 4 of the Commerce Act. Input methodologies were finalised in December 2010 and can be viewed on the Commission's website at www.comcom.govt.nz/input-methodologies