Feedback: customised price-quality paths for lines companies

Media release

Issued 3 July 2018
Release no. 146

Feedback wanted to improve process for customised price-quality paths for lines companies

The Commerce Commission is seeking feedback on two recent customised price-quality paths for electricity lines companies to improve future processes.

“We are seeking feedback on the recent Powerco and Wellington Electricity applications to see where future customised price-quality path processes can be more efficient and effective. Our aim is to improve confidence in the customised process for future applicants, in a way that delivers maximum value for New Zealanders,” Commissioner Dr Stephen Gale said.

In March 2018, the Commission published final decisions for customised price-quality paths for regulated lines companies Powerco and Wellington Electricity. This allowed both to invest in their networks at a higher level than provided for under the default price-quality path set for it by the Commission.

“The Commission has now assessed three customised price-quality path proposals. After reflecting on the two most recent processes, we see further opportunities to make improvements to promote better outcomes for consumers, while being mindful of adding unnecessary cost and complexity to preparing proposals,” Dr Gale said.

The Commission has identified key topics it wants feedback on for how to make its assessment more effective. Topics include ways to improve consumer consultation, the use of cost benefit analysis, how we communicate pricing impacts to consumers, how we hold lines companies accountable for delivering on their commitments, and the use of additional quality measures and independent verifiers.

The Commission is also seeking more general feedback, including on the effectiveness of changes made in the 2016 review of Input Methodologies, which are the upfront rules, processes and requirements underpinning regulation of monopoly businesses.

“The feedback we’re seeking is focused on the electricity sector but we’re also interested in any feedback which could be relevant to the gas sector,” Dr Gale said.

The Commission welcomes feedback by 31 July 2018 and responses to other parties’ feedback by 14 August 2018.

Feedback can be emailed to regulation.branch@comcom.govt.nz

The Commission will advise its next steps after reflecting on any submissions received.

The open letter can be found here.

Background

Regulation of electricity lines companies

As monopoly utilities, all 29 of the country’s electricity lines companies are regulated by the Commerce Commission under Part 4 of the Commerce Act. As part of this, the Commission sets the maximum prices 17 of the 29 lines companies can charge consumers and minimum quality standards they must meet. This is usually done through a default price-quality path (DPP). However, lines companies can also apply for a customised price-quality path. In doing so, the Commission must take account of the lines company’s specific circumstances to determine a new set of prices and quality standards. More information about customised price-quality regulation can be found on our website.

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