Commission sets ground rules for spending on grid

Friday 1st July 2011

The Commerce Commission today set out how it plans to oversee $3 billion of capital spending by the operator of the nation's electricity grid, Transpower New Zealand Ltd, over the next five years.

It proposed draft rules for approving investments in the national grid, which commission deputy chairwoman Sue Begg said would promote certainty about the effects of regulation.

"Increased regulatory certainty is important for fostering efficient investment," she said.

The commission took over responsibility for requesting or approving electricity grid upgrade plan proposals by Transpower -- a natural monopoly -- following the demise of the Electricity Commission.

Transpower had to halve planned price rises for electricity between 2006 and 2009 after the Commerce Commission threatened to place it under regulatory control. It had unsuccessfully argued that it needed higher prices to maintain capital spending on the national grid.

About 10 percent of the bills consumers receive has been estimate to be directly affected by Transpower costs.

Transpower chairman Wayne Brown said early last year that the grid operators would spend about $3.8 billion until the end of the 2015 financial year to help build greater capacity, reliability and capability into the national grid in order to meet future electricity demand, as well as connect new generators.

Set up in 2003 to regulate the electricity sector in New Zealand, the Electricity Commission's first commissioner was Roy Hemmingway, who tried to constrain Transpower's capital spending on an upgrade of power lines into south Auckland. He was replaced by David Caygill in 2007, and in November last year the Electricity Commission was replaced by an Electricity Authority.

The Commerce Commission said that it would oversee Transpower’s future capital spending proposals, and it plans to publish its final decisions before February 2012.

It is seeking submissions by August 12 on the draft decision released today.

The proposed new rules include requirements that must be met by Transpower, including independent verification and audit of the information it supplies regulators, and consultation and agreement with consumers; and set out how the commission will evaluate capital spending plans.

NZPA

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