New Zealand: RAB Valuation Review of Electricity Distribution and Gas Pipeline Business

Three separate reviews were undertaken for the Commerce Commission of New Zealand in relation to the Regulatory Asset Base (RAB) Valuation and Asset Adjustment Processes of Electricity Distribution Businesses (EDBs) and Gas Pipeline Businesses (GPBs).

Price-quality regulation (a form of performance-based regulation) is designed to ensure that EDBs and GPBs have similar incentives and pressures to suppliers operating in competitive markets and also aims to limit the ability of suppliers to earn excessive profits, while ensuring that consumer demands on service quality are met. A fundamental component of a default price-quality path (DPP) is the starting prices that are specified for each regulated supplier. A DPP reset is an opportunity to determine appropriate price and quality controls for the future. To inform the Commerce Commission on its decisions on any starting price adjustments for the DPP for the different regulatory periods, all the EDBs and GPBs were permitted to undertake an “asset adjustment process” for setting its initial RAB.

A total of 24 asset adjustment applications were reviewed by NCL: six (6) Exempt EDBs, fourteen (14) Non-exempt EDBs, and four (4) GPBs.