The Commerce Commission (“Commission”) has amended the input methodologies applicable to electricity lines services and gas pipeline services under Part 4 of the Commerce Act 1986.

The amended input methodologies are:

• Electricity Distribution Services Input Methodologies Determination 2012, [2012] NZCC 26*.
• Transpower Input Methodologies Determination [2012] NZCC 17†.
• Gas Distribution Services Input Methodologies Determination 2012, [2012] NZCC 27‡.
• Gas Transmission Services Input Methodologies Determination 2012, [2012] NZCC 28§.

The amendment is set out in the Electricity Lines Services and Gas Pipeline Services Input Methodologies Determination Amendment (WACC Percentile for Information Disclosure Regulation) 2014 [2014] NZCC 38, and will apply to information disclosure regulation for electricity lines services and gas pipeline services.

The amendment gives effect to the Commission’s decision to determine and publish a 67th percentile estimate of the weighted average cost of capital on an annual basis for the purposes of information disclosure regulation for electricity lines services and gas pipeline services.

The amendment also reduces the maximum rate, applicable under GAAP, that suppliers of electricity lines services and gas pipeline services subject to price-quality regulation may use for calculating the financing costs of assets for the purposes of information disclosure and customised price-quality regulation from the 75th percentile estimate of the weighted average cost of capital to the 67th percentile estimate.

These changes follow the Commission’s review of the appropriate weighted average cost of capital percentile for electricity lines services and gas pipeline services.

The review was initiated following the High Court’s comments on the lack of sufficient evidential basis for the current weighted average cost of capital percentile (see Wellington International Airport Ltd & Ors v Commerce Commission [2013] NZHC [December 2013]).

The Commission recently determined that the evidence collected supported a weighted average cost of capital for price-quality path regulation at the 67th percentile.

The Commission has now determined is that it is also appropriate for it to determine, on an annual basis, a weighted average cost of capital estimate at the 67th percentile for information disclosure purposes.

In the Commission’s view, disclosures by regulated suppliers, calculated on this basis, will assist interested persons to evaluate the effective performance of some suppliers.

Copies of the amendment determination and reasons paper are available on the Commission’s website at

www.comcom.govt.nz/further-work-on-wacc/

Dated at Wellington this 15th day of December 2014.

COMMERCE COMMISSION.

*New Zealand Gazette, 11 October 2012, No. 124, page 3552
†New Zealand Gazette, 12 July 2012, No. 84, page 2288
‡New Zealand Gazette, 11 October 2012, No. 124, page 3552
§New Zealand Gazette, 11 October 2012, No. 124, page 3552