The Commerce Commission today released its final decisions on its Input Methodologies Review, updating the key regulatory rules for electricity lines, gas pipelines, and airports in New Zealand.
Commissioner Vhari McWha says the rules are fundamental to ensuring our airports and energy sector can make a fair return on investments, while consumers are not overcharged for these services.
They guide how assets are valued, costs are allocated, risks are shared between businesses and consumers, and how businesses are compensated for their investments.
“The Commission has made a small number of key changes to our regulatory settings to strengthen the foundations of our regulatory approach” Ms McWha says.
The review, which involved a two-year process of analysis and consultation, found that the Input Methodologies are generally robust and will provide an appropriate and stable platform to support investment and innovation.
“We need investment to ensure that critical energy and airport infrastructure provides consumers with the services they demand, including preparing for electrification of our economy and maintaining resilience to major weather events,” Ms McWha says.
“The rules are generally technical in nature but the purpose of the changes we have made is to promote the long-term benefit of consumers. The changes ensure the regulations provide the right degree of flexibility to address uncertainty about the timing and scale of investments that need to be made.”
“Ensuring these investments are made at the right time is vitally important.”
Work on reset of electricity revenue controls underway
The Commission is in the process of considering the investment plans of most electricity lines companies, and Transpower.
Next year, the Commission will apply the Input Methodologies to set total revenue allowances for each of these companies for the remainder of the decade. One important part of the approach to the price-quality path reset that is not set out in the Input Methodologies, is the way we forecast expenditure allowances. The Commission has the flexibility to adjust our approach to forecasting both operating expenditure and capital expenditure where appropriate.
“We will consult on the total revenue we will allow suppliers to recover for regulated services. However, consumers should expect that greater investment and higher interest rates will likely mean higher prices to enable the services they want and need,” Ms McWha says.