Commission Seeks Feedback On Issues For Transpower's Expenditure Proposal

The Commerce Commission has today released a paper outlining the key issues it will focus on as it works to set expenditure and quality levels for Transpower from 2025.

As the operator of New Zealand’s National Grid, Transpower is subject to price-quality regulation that sets the total amount of revenue it can earn from its customers and the minimum standards of quality it must deliver in return.

Transpower submitted its spending proposal for 2025-2030 to the Commission in November 2023, proposing a total increase of 32% in capital expenditure and 20% in operating expenditure. In its proposal, Transpower explains this is driven by an increased work programme to replace or upgrade ageing assets as it seeks to maintain a reliable and secure electricity grid, to support New Zealand’s energy future, including delivering a net zero carbon economy.

Given the potential price impacts of Transpower's proposed expenditure on consumer electricity bills, Commissioner Vhari McWha says the Commission's assessment will “focus on ensuring that the proposal is well-justified and in the long-term interests of Kiwi consumers”.

“New Zealanders need to feel confident that the network is being invested in appropriately, at a level that ensures a secure and sustainable supply now and particularly into a future where there will be increasing use of and reliance on electricity as a source of renewable energy,” Ms McWha says.

Given the material increase in Transpower’s proposed work programme, the Commission is also seeking views on Transpower’s ability to deliver on its plans.

“Across the electricity sector in New Zealand, we are seeing increases in forecast investment to help deliver net-zero carbon emissions by 2050.

“This will require a significant investment in our country’s national grid and wider infrastructure, such as local networks. This is likely to present challenges to Transpower as it seeks to recruit the necessary workforce to deliver on its plan,” Ms McWha says. 

The Commission is seeking stakeholder feedback on the issues identified in its paper, which can be found on the on the Commerce Commission’s website. Submissions can be made by 5pm, Wednesday, 21 February 2024 via infrastructure.regulation@comcom.govt.nz.

The Commission will publish a draft decision in May 2024 for further consultation and will make a final decision on Transpower’s price-quality path in November 2024.

Background

Transpower’s role is to ensure electricity is transported from generators to large electricity users and distribution businesses that deliver it to homes and businesses. As the National Grid owner, Transpower is responsible for building, maintaining, and operating this transmission network.

Under Part 4 of the Commerce Act 1986, the Commerce Commission is responsible for setting the maximum revenue Transpower can recover from consumers to run the transmission network efficiently, along with setting quality standards, performance incentives, and the term of the regulatory period. Collectively, these comprise Transpower’s “price-quality path”.

A price-quality path reset provides an opportunity for Transpower to put forward its spending plans to the Commission. The Commission then assesses how well the plans promote the long-term benefit of electricity consumers.

Transpower has been regulated by way of individual price-quality regulation since 1 April, 2011. This will be the fourth regulatory period in which Transpower has had an individual price-quality path in place, with the new regulatory period commencing on 1 April 2025.

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