Media Releases

Final decisions on fast track amendments for customised paths

12 November 2015

The Commerce Commission has today published amendments that provide more flexibility for gas and electricity distributors when applying for a customised price-quality path (CPP).

17 of New Zealand’s 29 electricity distributors and four gas pipeline businesses are subject to price-quality regulation. Default price-quality paths limit the revenues these suppliers can earn, or the maximum average prices they can charge. After the default path is set, they have the option of applying to the Commission for a CPP that is tailored to their specific circumstances.

The Commission announced in July this year it would fast track certain amendments to the CPP requirements in response to requests from regulated businesses to complete this work ahead of the main input methodologies review. Draft decisions and amendments were released for consultation in September. Having considered submissions, we have now made our final decisions.

Commission Chair Dr Mark Berry said the amendments help make the process of applying for a CPP more flexible and cost-effective.

“Suppliers can now apply to be exempt from certain information requirements or have them modified to better align with their existing business practices. This should reduce some of the time and cost involved in preparing a proposal. We consider that allowing this level of flexibility does not come at the expense of ensuring we receive all the information we need to evaluate their proposal and set a customised path,” Dr Berry said.

The changes are intended to be available to suppliers applying for CPPs from 2016.

Further information on the input methodologies review can be found here.

Background

What is a customised price-quality path?

17 of New Zealand’s 29 electricity distributors and  four gas pipelines businesses are subject to price-quality regulation. Default price-quality paths limit the revenues these businesses can earn, or the maximum average prices they can charge, while setting minimum quality standards that must be maintained.
After the default path is set, they can apply to the Commission for a CPP that is tailored to their specific circumstances. Currently Orion – the electricity distributor for central Canterbury between the Waimakariri and Rakaia rivers, and from the Canterbury coast to Arthur’s Pass Christchurch area – is the only electricity distributor on a CPP.

What are the Input Methodologies (IMs)?

The IMs are the upfront rules, requirements and processes that apply to regulation in New Zealand. Under Part 4 of the Commerce Act, the Commission is required to set and apply IMs to regulated electricity lines services (distribution and transmission), gas pipelines (distribution and transmission) and specified airport services.

What is the IM review?

The IM review is the opportunity to assess whether there are any necessary changes to the IMs to more effectively promote the long term benefit of consumers. We do this review in consultation with all stakeholders. The Commerce Act requires the Commission to review each IM within seven years of its date of publication and, after that, at intervals of no more than seven years.

Previous media releases

All previous media releases on the IMs review can be found here.