The Wellington-based commission yesterday said it had reviewed the self-assessments provided by 29 electricity lines businesses and found Nelson Electricity and Top Energy had failed to comply with threshold guidelines.
However, commission chair Paula Rebstock said the commission considered these breaches were due more to timing differences between movements in their transmission costs and in their average prices, as opposed to blatant breaches. She added that the commission had determined "not to make a declaration of control in respect of the services supplied by those lines businesses".
The commission cleared 12 lines businesses - Alpine Energy, Aurora Energy, Counties Power, Eastland Network, Electricity Ashburton, Horizon Energy Distribution, Network Tasman, Northpower, Orion, Scanpower, Vector, and WEL Networks - while going back to the remaining 15 lines businesses requesting further information to complete its assessments.
The price path threshold, set by the commission last June, applies to 29 lines businesses, including Transpower. A distribution lines business is deemed to have breached the threshold if its average price, net of certain costs including Transpower charges, is found to have increased from August 2001 to September 2003.
The commission also said it was inviting submissions on its draft information disclosure requirements for large electricity lines businesses, and on its draft handbook for the valuation of system fixed assets owned by lines businesses using the Optimised Deprival Valuation (ODV) methodology.
Acting general manager Geoff Thorn said the commission intended taking into account the business-specific circumstances of any lines business that was the subject of a post-breach inquiry, which varied from the published Ministry of Economic Development ODV handbook.
The commission also released final decisions relating to the regulation of large electricity lines businesses, as required by Part 4A of the Commerce Act.
It said it had decided to retain the two existing thresholds for 2004: a price path threshold presenting the expected annual change in lines business average prices; and a quality threshold, comprising a reliability criterion and a consumer engagement criterion. However, new parameters will apply for the price path threshold.
The commission had grouped lines businesses into four sections, each of which was assigned a different price path, with all businesses retaining incentives for annual efficiency improvements to avoid breaching the thresholds. "The majority of lines businesses will be expected to reduce their prices in real terms," added Rebstock.
Businesses with below-average productivity, or with relatively high prices, will face a steeper price path than more productive businesses, or those which have been consistently maintaining low prices.
Rebstock added that three distribution businesses - Northpower in Whangarei, OtagoNet and Te Awamutu-based Waipa Networks - had been consistently maintaining lower prices while exhibiting higher productivity. These companies would be able to gradually increase prices to more efficient and sustainable levels without breaching the price path threshold.
Distribution businesses will be assessed annually against the thresholds, over a five-year period from next April.
Transpower's thresholds will be set for a period of one year from next July, primarily due to uncertainties regarding the approach the Electricity Commission will take with respect to Transpower's investment programme. For this period, Transpower's price path threshold will be set the same as for average-performing distribution businesses.
The commission released by the Parsons Brinckerhoff Associates' report "Development of a Handbook for Optimised Deprival Valuation of System Fixed Assets of Electricity Lines Businesses" that explained the commission's rationale in addressing issues raised by interested parties. It also released the report "Regulation of Electricity Lines Businesses, Analysis of Lines Business Performance (1996-2003)" of Australian firm Meyrick and Associates, which analysed industry performance used by the commission in allocating lines businesses to different groups.
Interested parties are invited to make written submissions on these documents by February 9.
