The Commerce Act (Transpower Thresholds) Notice 2008 set price and quality thresholds, and information requirements that applied to Transpower during the administrative settlement (1 July 2008 to 31 March 2011). Our role was to assess and enforce compliance against those thresholds and information requirements.
This page summarises Transpower's performance against the thresholds and information requirements as specified by the notice. More information about the administrative settlement can be found under Transpower - Administrative Settlement.
Performance during the settlement
Each year of the settlement Transpower publically disclosed compliance statements that confirmed Transpower's compliance, or otherwise, with the requirements of the notice. Copies of the compliance statements are published on Transpower's website and can also be found below.
During the settlement Transpower demonstrated compliance with the transmission thresholds and information requirements, but not with the reliability measures of the quality threshold as specified by the notice.
Transmission (revenue requirement) and Transmission (non-Part F capex) thresholds
The following table summarises Transpower's performance against the Transmission (revenue requirement) and Transmission (non-Part F capex) thresholds.
|
|
Clause |
Threshold |
Transpower's self assessment |
|---|---|---|---|
|
Year ended 31 March 2008 |
|
|
|
|
Transmission (revenue requirement) |
5 |
|
|
|
AC year end revenue requirement |
(a) |
497,768 |
460,685 |
|
Less: customer ex post economic gain/(loss) |
|
|
(37,083) |
|
HVDC year end revenue requirement |
(b) |
89,457 |
92,853 |
|
Less: customer ex post economic gain/(loss) |
|
|
3,396 |
|
Actual Operating Revenue Received |
|
587,225 |
553,538 |
|
Less: Ex post Economic gain /(loss) to consumers
Note: The ex post economic gain/(loss) is the difference between the maximum allowable revenue and actual revenue received from customers (under recovery is shown as a negative and an over recovery is shown as a positive). |
|
|
(33,687) |
|
Year end revenue requirement |
|
|
587,225 |
|
|
|
|
|
|
Non-Part F capex |
6(1) |
120.7 |
81.2 |
|
|
|
|
|
|
Year ended 31 March 2009 |
|
|
|
|
Transmission (revenue requirement) |
5 |
|
|
|
AC year end revenue requirement |
(a) |
508,335 |
511,317 |
|
Less: customer ex post economic gain/(loss) |
|
|
2,982 |
|
HVDC year end revenue requirement |
(b) |
86,969 |
82,887 |
|
Less: customer ex post economic gain/(loss) |
|
|
(4,082) |
|
Actual Operating Revenue Received |
|
595,304 |
594,204 |
|
Less: Ex post Economic gain /(loss) to consumers |
|
|
(1,100) |
|
Year end revenue requirement |
|
|
595,304 |
|
|
|
|
|
|
Non-Part F capex |
6(1) |
202.8 |
109.1 |
|
|
|
|
|
|
Year ended 31 March 2010 |
|
|
|
|
Transmission (revenue requirement) |
|
|
|
|
AC year end revenue requirement |
|
541,021 |
551,633 |
|
Less: customer ex post economic gain/(loss) |
|
|
10,612 |
|
HVDC year end revenue requirement |
|
79,979 |
81,605 |
|
Less: customer ex post economic gain/(loss) |
|
|
1,626 |
|
Actual Operating Revenue Received |
|
621,000 |
633,238 |
|
Less: Ex post Economic gain /(loss) to consumers |
|
|
12,238 |
|
Year end revenue requirement |
|
|
621,000 |
|
|
|
|
|
|
Non-Part F capex |
6(1) |
189.6 |
186.5 |
|
|
|
|
|
|
Year ended 31 March 2011 |
|
|
|
|
Transmission (revenue requirement) |
|
|
|
|
AC year end revenue requirement |
|
602,948 |
547,494 |
|
Less: customer ex post economic gain/(loss) |
|
|
(55,452) |
|
HVDC year end revenue requirement |
|
73,826 |
84,840 |
|
Less: customer ex post economic gain/(loss) |
|
|
11,012 |
|
Actual Operating Revenue Received |
|
676,774 |
632,334 |
|
Less: Ex post Economic gain /(loss) to consumers |
|
|
(44,440) |
|
Year end revenue requirement |
|
|
676,774 |
|
|
|
|
|
|
Non-Part F capex |
6(1) |
225.6 |
221.7 |
|
|
|
|
|
Quality threshold
The quality threshold that applied to Transpower under the administrative settlement consisted of the following three measures:
(i) Number of unplanned interruptions
(ii) Total interruptions (calculated in system minutes)
(iii) Customer communication
Transpower complied with the customer communication measure during the administrative settlement. More details about Transpower's customer communication strategies throughout the settlement period can be found in the company's threshold compliance statements available on Transpower's website and also below.
Transpower breached the threshold for the number of unplanned interruptions for three out of four years during the settlement (Transpower complied during 2010/11), and breached the total number of interruption each year of the administrative settlement.
The following table summarises Transpower's performance against the number of unplanned outages and total interruptions measures.
|
Quality Threshold |
Threshold |
Transpower's self assessment |
Performance |
|---|---|---|---|
|
Total number of unplanned interruptions for the year ending 31 March |
|
|
|
|
2008 |
92.4 |
115.0 |
+22.6 |
|
2009 |
92.4 |
112.0 |
+19.6 |
|
2010 |
92.4 |
106.0 |
+13.6 |
|
2011 |
92.4 |
89.0 |
compliant |
|
Total interruptions (calculated in system minutes) For the year ending 31 March |
|
|
|
|
2008 |
8.3 |
28.0 |
+20.3 |
|
2009 |
8.3 |
18.1 |
+9.8 |
|
2010 |
8.3 |
23.5 |
+15.2 |
|
2011 |
8.3 |
15.2 |
+6.9 |
Graphs showing Transpower's historical performance and performance during the settlement are available under Supporting Documents.
Decision not to take any further regulatory action
The Commission have discussed Transpower's poor reliability performance with the Chief Executive, Patrick Strange and his senior staff on a number of occasions. And Transpower has committed to 'turning around' its performance during the first regulatory control period of the individual price-quality path, 1 April 2011 to 31March 2015.
In February 2011, Transpower forecast expenditure of $717.5 million of operating and capital expenditure for its individual price-quality path. Forecast increases in capital expenditure are driven largely by increases in grid replacement and refurbishment expenditure. Transpower claims that the increased expenditure is required to target improvement in its reliability performance.
We engaged Geoff Brown & Associates Ltd (GBA) to review Transpower's forecast operating and minor capital expenditure. GBA concluded that Transpower had correctly forecast the expenditure required to address the company's poor reliability performance. More information about the setting of operating and capital expenditure under the individual price-quality path can be found under Opex Capex Review (2012/13-2014/15). The Commission took account of Transpowers commitment to improving reliability when we set the quality standards for the individual price-quality path. We chose not to implement a reliability performance incentive mechanism until the second regulatory control period.
We considered that imposing financial penalties during a time when significant investment is required would be counter-productive. We also accepted that even under the best working practices some increases in the level of outages is very difficult to avoid when extensive maintenance and upgrade work on the grid is being undertaken.
Accordingly, we determined not to take any further regulatory action in respect of the breaches of the quality threshold during the administrative settlement.
Individual price-quality regulation
With our assessment of the 2011 threshold compliance statement completed the administrative settlement has now expired. Since 1 April 2011 Transpower has been subject to an individual price-quality path under Part 4 of the Commerce Act. More information about price-quality regulation, as it applies to Transpower post the administrative settlement, can be found Price-Quality Regulation that Applies to Transpower.
