The Commerce Commission (“Commission”) gives notice that it has amended the input methodologies (IMs) applicable to electricity distribution businesses (EDB) under Part 4 of the Commerce Act 1986 (“Act”).
The Commission has amended the IMs in:
- Electricity Distribution Services Input Methodologies Determination 2012  NZCC 26.
The amendments are set out in:
- Electricity Distribution Services Input Methodologies Amendments Determination (No. 2) 2019  NZCC 20.
The amendments to the EDB IMs relate to:
- changes to support implementation of incremental improvements to the way the default price-quality path (DPP) is set; or
- changes to enhance certainty about the rules and correct for technical errors ahead of the reset of the default price-quality path for EDBs from 1 April 2020 (EDB DPP3).
Specifically, these IM amendments include:
Specification and definition of price
- introducing the ability for the Commission to specify in a DPP or customised price-quality path (CPP) for EDBs a limit or limits on the annual maximum percentage increase in forecast revenue from prices;
- introducing a new recoverable cost for expenditure on innovation projects for EDBs subject to a DPP or CPP, including consequential amendments to the value of commissioned assets provisions in respect of that recoverable cost;
- introducing a new recoverable cost for Fire Emergency New Zealand levies for EDBs subject to a DPP or CPP;
- clarifying and extending the scope of the recoverable cost relating to charges for a ‘new investment contract’ to allow an EDB to use a third-party financier to finance a new investment contract between the EDB and Transpower or another transmission provider;
Circumstances in which a DPP may be reconsidered within a regulatory period
- introducing new reopeners for EDBs subject to a DPP to respond to certain projects which require major capital expenditure (“capex”) for new connections (including alterations to existing connections), system growth, a combination of new connections (including alterations to existing connections) and system growth, and asset relocations.
Correct errors or enhance certainty about the rules ahead of the DPP reset
- updating the pass-through cost available to EDBs subject to a DPP or CPP for levies payable by all members of the Electricity and Gas Complaints Commissioner Scheme;
- amending the definition of “operating costs”, specifically so that court-imposed or statutory fines or penalties cannot be treated as “operating costs”;
- correcting implementation errors in the incremental rolling incentive scheme (IRIS) drafting applying to EDBs subject to DPPs and CPPs;
- correcting typographical errors in matters relating to proposals by a regulated supplier for a CPP;
- amending the definition of “other regulated income” to clarify that it includes gains/losses on disposals; and
- amending the quality standard variation provisions to be more generalised so that they do not need to be updated whenever the DPP quality standards are changed.
The reasons for the above amendments are to:
- promote the purpose of Part 4 of the Act (section 52A) more effectively;
- promote the purpose of IMs (section 52R) more effectively (without detrimentally affecting the promotion of the purpose of Part 4 of the Act); and
- reduce compliance costs, other regulatory costs or complexity (without detrimentally affecting the promotion of the purpose of Part 4 of the Act).
A copy of the determination and the reasons paper is available on the Commission’s website, https://comcom.govt.nz/regulated-industries/input-methodologies/projects/amendments-necessary-to-implement-the-2020-electricity-distribution-default-price-quality-path, and for inspection free of charge, or for purchase at a reasonable price, at the Commission’s Office at 44 The Terrace, Wellington (during ordinary office hours).
Date of Notice: 26 November 2019.