Commerce Commission announces revenue cap for Transpower

Commerce Commission announces revenue cap for Transpower

The Commerce Commission today announced that the revenue cap for Transpower’s 2011/12 pricing year will be set at $644 million. This will be the first revenue cap set under individual price-quality regulation under Part 4 of the Commerce Act 1986, and Transpower will be permitted to recover up to this amount through its transmission prices.

In addition to the amount of the revenue cap, Transpower is also able to recover through its pricing a further $39 million in specified pass-through and other recoverable costs. This will result in total allowable revenue of $683 million for Transpower for 2011/12.

This total amount represents an overall increase in allowable revenue of 9.5 per cent relative to 2010/11, largely reflecting the investment return on an increased approved capital spend. The overall amount of the increase is, however, lower than was forecast by Transpower in March 2010, primarily due to the now expected later commissioning of some major capital expenditure projects and a lower weighted average cost of capital being applied by the Commission.

Transpower’s revenue cap must be calculated and set by the Commission before December, when Transpower must announce its prices each year, so that Transpower has time to calculate these prices. The revenue cap will be reflected in the Commission’s final individual price-quality path determination in respect of Transpower, which will be made by 31 December 2010 and which is currently subject to consultation. More information can be accessed on the Commission’s website at www.comcom.govt.nz/developing-new-price-quality-regulation-to-apply-to-transpower/

ENDS

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