The Commerce Commission has today released its review of the 2007/08 asset management plans of electricity distribution businesses, noting satisfactory progress by the majority of electricity distribution businesses towards best practice in asset management planning.

Electricity distribution businesses are required to disclose their asset management plans (AMP) under the Electricity Information Disclosure Requirements (2004).

The review builds on the findings of last year's review and primarily focuses on the material differences between each of the distribution businesses' 2006/07 and 2007/08 plans. The assessment review, as in previous years, also provides a comparison of the relative performance of each of the businesses.

Commerce Commission Chair Paula Rebstock noted the progress that the majority of electricity distribution businesses have made towards best practice in asset management planning. "The Commission is particularly pleased that businesses previously identified at the lower end of the assessment scale appear to be making conscious decisions to advance their asset management practices," said Ms Rebstock.

The assessment process, by its nature, involves an exercise of discretion, and the term 'compliance' is used in the broad sense to reflect the extent to which an AMP is consistent with the best practice criteria in the Requirements and the Commission's Handbook. The 2007/08 review has revealed the following notable performances:

  • The Lines Company, WEL Networks, Orion, Network Tasman, Northpower and The Power Company being ranked as the top performers in the review;
  • the most significant improvements from last year's review were achieved by Alpine Energy, MainPower and Network Tasman;
  • Vector's and Westpower's AMPs were assessed as having the largest deterioration in performance against the previous review; and
  • despite making improvement on their 2006/07 asset management plan, Electra's 2007/08 AMP is the lowest performer compared with other distribution businesses.

This year's review reinforces findings from the 2006/07 review, including:

  • the areas that have the greatest room for improvement remain the same, namely: service levels (which includes target setting, with relevant justification, for consumer oriented services, and asset performance and efficiency) and performance evaluation (which includes details of how performance against targets will be measured, evaluated and improved); and
  • a similar level of overall compliance, with only a marginal increase in the average level achieved across the distribution businesses;
  • comparable results for the relative performance of distribution businesses, with a similar level of variability in quality of disclosed asset management plans.

Asset management plans underpin the operational and capital expenditure planning of electricity distribution business and should reflect the asset management practices employed. The Commerce Act requires the public to be informed about the forecast expenditure of businesses regulated under Part 4A. The review of these plans serves as an indicator for comparing and evaluating the performance of all electricity distribution businesses in the discipline of asset management planning.

"With the benefit of several asset management plans reviews setting out the Commission's expectations, we expect there to be further and marked improvement in the quality of the distribution businesses' asset management plans over the next couple of business planning cycles," said Ms Rebstock.

Ms Rebstock said she also expects that the proposed changes to the information disclosure requirements should further assist this process.

The Commission's review, the PB Associates report and other related documentation regarding disclosure requirements is available on the Commission's web site www.comcom.govt.nz under Electricity Information Disclosure Requirements.

Background

The Commission's review has been informed by a report prepared by Parsons Brinkerhoff Associates (PB Associates). The review assesses the publicly disclosed AMPs of 28 large EDBs against the Electricity Information Disclosure Requirements (2004) (Requirements) and the Electricity Information Disclosure Handbook (2004) (Handbook), and their amendments. The review primarily focuses on the material differences between the 2006/07 and 2007/08 AMPs to highlight those areas where improvement or deterioration has occurred.

As per last year's review, the assessment framework evaluates AMPs against a series of questions based on the Requirements and Handbook.The assessment process, by its nature, involves an exercise of discretion, and the term 'compliance' is used in the broad sense to reflect the extent to which an AMP is consistent with the best practice criteria in the Requirements and the Commission's Handbook.

The need for reliable and timely disclosure of information in asset management plans is reflected in the purpose statement in section 57T(1) of the Commerce Act 1986. Section 57T(1) states:

The purpose of this subpart is to promote the efficient operation of markets directly related to electricity distribution and transmission services by ensuring that large line owners and large electricity distributors make publicly available reliable and timely information about the operation and behaviour of those businesses, so that a wide range of people are informed about such factors as profits, costs, asset values, price (including terms and conditions of supply), quality, security, and reliability of supply of those businesses.

The attached pdf has a table which compares the relative performance of the electricity distribution businesses in the 2006/07 and 2007/08 reviews.