Commerce Commission releases draft price-quality paths for electricity distributors
The Commerce Commission is seeking submissions on its proposed average price limits and quality targets for 16
electricity distributors.
The draft default price-quality paths cover the period 2015-2020, and will take effect from 1 April 2015.
Commerce Commission Deputy Chair Sue Begg said, “the draft price-quality paths balance the need to ensure that these
businesses have incentives to invest, and to improve the efficiency and quality of their services, while being
constrained from achieving excessive profits.”
“Our approach to setting these price-quality paths is based on methodologies that we have used before. The pricing model
has been available for some time. This should mean that businesses, investors, and consumers can better predict the
kinds of price changes that will result from our price resets,” said Ms Begg.
This proposed price path would see overall average prices decreasing by a small margin from 2015. “One of the reasons
for the overall decrease in prices is that the benefits of efficiency gains by suppliers are being passed through to
consumers,” said Ms Begg. “This is an important benefit of the price-reset process.”
Adjustments for individual distributors vary by region. Some regions will see price increases primarily because those
distributors under-recovered in previous years and are still catching up. The two proposed largest increases are 13.5%
for Alpine Energy and 8.4% for Top Energy. The Commission has proposed an on-going cap on the increases for these
distributors over the five years to limit the size of price increases for consumers in those regions.
The Commission is also proposing new incentive schemes that will provide long-term benefits for consumers by rewarding
and penalising businesses based on their performance. This includes incentives schemes for quality and energy
efficiency.
“We have been working closely with the sector in developing the incentives to make sure that they work well. We would
like to acknowledge the work of the ENA technical groups in this process,“ said Ms Begg.
The draft decision does not apply to Orion New Zealand Limited, which applied for and was granted a customised
price-quality path in recognition of its change in circumstances after the Canterbury earthquakes. Transpower is subject
to a separate individual price-quality path.
Any distributor who believes the default price-quality path does not suit their current circumstances can apply for a
customised price-quality path.
The draft decision is now open for consultation, and will be subject to change following submissions and any further
information provided by distributors. Interested parties should email their submissions to regulation.branch@comcom.govt.nzby 15 August 2014.
Following consultation, the Commission will make a final decision on the reset of the default price-quality path by 28
November 2014. The new default price-quality paths will apply to distributors from 1 April 2015.
The draft decision and a background fact sheet can be found at http://www.comcom.govt.nz/regulated-industries/electricity/electricity-default-price-quality-path/default-price-quality-path-from-2015/.
A map showing changes by distributor can be found at http://www.comcom.govt.nz/electricity-distributor-map/
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