Commerce Commission cuts rate of return for monopoly electricity networks

Tuesday 20th December 2016

The Commerce Commission has cut the rate of return that local electricity lines networks and national grid owner Transpower can charge in its latest decisions on monopoly network pricing.

The decisions affect electricity and gas networks, as well as airports and are part of the statutory process of review intended to ensure that monopoly service providers earn fair rates of return that allow them to invest profitably in essential services while not overcharging consumers.

The changes to the commission's 'input methodologies' do not apply to electricity itself, which is provided by competing generators and retailers, but to the wires that carry electricity around the country on the national grid and local networks of electricity lines, all of which operate as monopolies. Gas pipe networks are also covered by the regime.

The input methodology weighted average cost of capital allowable for electricity networks and Transpower falls to 5.18 percent from 5.23 percent.

Also announced is an accelerated depreciation regime for electricity networks, to allow for the growing competition they will face from emerging off-grid technologies such as roof-top solar installations, which the Electricity Authority today said were now in place in 11,000 locations around New Zealand.

A reduction in average remaining asset lives of up to 15 percent on average will be allowed as part of a "precautionary measure" to allow electricity networks to "recover the cost of assets more quickly".

BusinessDesk.co.nz

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