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2005/06 electricity asset management plans

Issued 16 August 2006/022

Review of 2005/06 electricity asset management plans

The Commerce Commission has today released a summary report of its review of the 2005/06 asset management plans of electricity lines businesses. Electricity lines businesses are required to disclose their asset management plans under the Electricity Information Disclosure Requirements (2004).

The summary report, prepared by Farrier Swier Consulting on behalf of the Commission, reviews the plans and identifies areas where improvements need to be made so that future asset management plan disclosures comply with new information disclosure requirements.

The report’s key findings are:
 the majority of lines businesses have prepared plans that are reasonably consistent with the 2004 Requirements;
 the larger lines businesses have a higher level of compliance than the smaller lines businesses;
 there was a high degree of compliance variability across the asset management plan categories, not only between different lines businesses, but also within a lines business;
 an assessment analysis of the disclosed plans for compliance and best practice ranked Orion New Zealand, Eastland Network, Electricity Ashburton, and Powerco as meeting the 2004 Requirements “consistently well”, followed by Unison Networks; and
 the least compliant lines businesses were Top Energy, Network Waitaki, Electricity Invercargill, The Power Company, and OtagoNet Joint Venture.

Commerce Commission Chair Paula Rebstock said she was pleased with the progress the line businesses were making towards best practice in asset management planning.

”The Commission sees the asset management plan as the principal planning document driving factors such as price and the security and reliability of supply,” Ms Rebstock said.

“Sound asset management planning is essential to ensure distribution businesses improve efficiency and provide services at a quality that reflects consumer demands.”

Ms Rebstock said that while it is seeking to move industry towards best practice, the Commission does not prescribe precisely how the asset management plans should be presented nor how asset management should be implemented.

“Under the targeted control regime for electricity, there is no prior approval of investments, unlike the approval required in many overseas jurisdictions,” Ms Rebstock said.

“Transparency and accountability are therefore essential to ensure businesses are making the right ongoing investment decisions on behalf of consumers,” said Ms Rebstock.

“This is why the Commission is required to gather such information and make it publicly available.

“The new requirements will also enable the early identification of significant changes in the level of investment needed for the future.”

The review was carried out to ascertain the level of compliance with the 2004 Electricity Information Disclosure Requirements (2004 Requirements).

The need for reliable and timely disclosure of information in asset management plans is reflected in the purpose statement in section 57T(1) of the Commerce Act 1986. Section 57T(1) states:

The purpose of this subpart is to promote the efficient operation of markets directly related to electricity distribution and transmission services by ensuring that large line owners and large electricity distributors make publicly available reliable and timely information about the operation and behaviour of those businesses, so that a wide range of people are informed about such factors as profits, costs, asset values, price (including terms and conditions of supply), quality, security, and reliability of supply of those businesses.

A copy of the report is available on the Commission’s web site, as well as related documentation regarding 2004 and 2006 Requirements.


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