New transmission pricing methodology

Commission consults on Transpower recovering costs of new transmission pricing methodology (TPM)

The Commerce Commission is seeking feedback on a proposal to allow Transpower to recover about $5 million spent so far developing a new transmission pricing methodology (TPM).

The Electricity Authority requested Transpower, the operator of the national electricity grid, to develop the new TPM after publishing new transmission pricing guidelines last year.

Transpower’s expenditure on the TPM was not included in its operating expenditure allowance in its individual price-quality path (IPP) for the 1 April 2020 to 31 March 2025 regulatory period because the timing and cost were not certain when the Commission set the IPP in 2019.

The Commission determines Transpower’s IPP under Part 4 of The Commerce Act 1986, which establishes the maximum revenues that Transpower may recover from its customers for its electricity transmission services, as well as the minimum quality standards it must meet for those services.

The Commission is now required under the Act to reconsider Transpower’s IPP to take account of the new guidelines following a request from the Electricity Authority.

Transpower will be able to recover the TPM costs in its allowable revenues in the next regulatory period commencing on 1 April 2025. There will also be further implementation costs for the new TPM, but these will be considered separately once the Electricity Authority has approved the TPM and there is greater certainty on the likely final costs.

The reasons paper detailing the Commission’s draft decision is available on the Commission’s website. Instructions for submissions are in the paper, which are due by 5pm on 22 September 2021.

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