Transpower’s maximum allowable revenues adjusted

Transpower’s maximum allowable revenues adjusted for coming two year period

The Commerce Commission has completed its review of Transpower’s performance in 2011/12 against prices set in the Individual price-quality path and has adjusted Transpower’s maximum allowable revenue (MAR) for the 2013/14 and 2014/15 years.

Each year the Commission reviews Transpower’s actual revenue and expenditure and adjusts allowed revenue for the coming years to ensure Transpower continues to comply with the price path. Adjustments are made to exclude capital expenditure which has not yet been approved by the Commission, and to include new future capital expenditure that has been approved by the Commission.

Today’s adjustment reduces the 2013/14 allowable revenue from $906 million to $874 million.

“The annual adjustments allow the Commission to take account of unders and overs and readjust future maximum allowable revenues to ensure that, on the whole, through the regulatory period Transpower does not either under or over-charge its customers,” said Commerce Commission Deputy Chair Sue Begg.

Updates to the 2013/14 and 2014/15 Forecast MARs can be downloaded from our website at: www.comcom.govt.nz/updates-to-the-2013-14-and-2014-15-forecast-mars-october-2012/

Background
Transpower is the sole owner and operator of the New Zealand national electricity transmission grid.

Since April 2011, Transpower has been regulated under Part 4 of the Commerce Act by way of individual price-quality regulation. The individual price-quality path governs Transpower's maximum revenue for each pricing year, with the path being reset every five years.

Under individual price-quality regulation, the Commission sets an approved level of operating expenditure and capital expenditure to apply to Transpower for each regulatory control period of four to five years.

Transpower's revenue forecasts are based on capital expenditure already approved by the Commission. The revenue forecasts do not anticipate future approvals of new projects. Future capital expenditure approvals are dealt with through future updates to the allowable revenue.

Transpower is also required to provide forecasts of the operating expenditure it considers necessary. After taking into account all feedback received during consultation, the Commission makes a final determination when calculating the forecast maximum allowable revenue to apply. These reviews occur prior to the start of each regulatory control period. The Commission reviewed Transpower's level of proposed operating expenditure, and after forming its own view and consulting on this, published its final decision for the current regulatory period in 2011.

The next round of consultation on Transpower’s maximum allowable revenue will be in 2014 for the regulatory period that commences on 1 April 2015.

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