The Commerce Commission (“Commission”) gives notice that it has amended the input methodologies (“IMs”) applicable to electricity lines services under Part 4 of the Commerce Act 1986 (“Act”).

The amended IMs are:

• Electricity Distribution Services Input Methodologies Determination 2012 [2012] NZCC 26 (“EDB IMs”);
• Transpower Input Methodologies Determination [2012] NZCC 17 (“Transpower IMs”); and
• Transpower Capital Expenditure Input Methodology Determination [2012] NZCC 2 (“Capex IM”).

The amendments are set out in:

• Transpower Input Methodologies Amendments Determination (No. 2) 2019 [2019] NZCC 16;
• Transpower Capital Expenditure Input Methodology Amendments Determination (No. 2) 2019 [2019] NZCC 17; and
• Electricity Distribution Services Input Methodologies Amendments Determination 2019 [2019] NZCC 18.

Amendments to the IMs relate to:

• for both the EDB IMs and the Transpower IMs:
• introducing new definitions of “lease payment”, “operating lease” and “right-of-use asset”;
• amending the definitions of “operating expenditure” and “identifiable non-monetary asset”;
• amending the definition of “physical asset life” for “right-of-use assets”;
• amending the “opex incentive amount” for the purposes of the incremental rolling incentive scheme (IRIS) calculation to include the impact of operating lease payments;
• for the Transpower IMs only, correcting an implementation error in the formula for the IRIS; and
• for the EDB IMs only:
• amending the “capex incentive amount” for the purposes of the IRIS calculation to ensure the impact of “right-of-use assets” is included for the “capex wash-up” component of the calculation, but excluded from the “retention adjustment” component; and
• amending the taxation provisions to assign a generally accepted accounting practice (GAAP)-based opening deferred tax balance to be applied to “right-of-use assets” and any other assets that may not have a corresponding regulatory tax asset value.

The amendments to the Capex IM relate to amending the calculation of the base capex expenditure adjustment to exclude the impact of ”right-of-use assets”.

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).

Further information

Copies of the determinations, and the accompanying reasons paper for the determinations, are available on the Commission’s website via the following link: https://comcom.govt.nz/regulated-industries/input-methodologies/projects/operating-leases.

Copies of these documents are also available 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: 13 November 2019.

COMMERCE COMMISSION.