Networks Pricing
The
price regulation powers and responsibilities relating to
the setting of prices to be paid by network users for
the conveyance of electricity through and electricity
network are set out specifically in Part 3 of the
Electricity Networks (Third Party Access) Code.
While the Code set out in some
detail the determinations that were required to be made by the Commission in the
first regulatory control period, with respect to the second regulatory control
period, clause 66(3) of the Code provides that:
“The revenue or price caps
that are to apply during the second and subsequent regulatory control periods
are to be determined by the regulator in a manner that:
(a) in the regulator’s opinion, most effectively achieves the desired outcomes
set out in clause 63; and
(b) is consistent with generally accepted regulatory practice at the time.”
First Regulatory Control
Period
2004 Regulatory Reset
2009 Regulatory Reset
In the lead-up to the
commencement of the third regulatory control period (the five-year period
commencing 1 July 2009), the Code requires the Commission as regulator - in
consultation with interested parties - to review the price regulation
methodology used in the previous regulatory control period with a view to modifying
the methodology as appropriate. The Commission refers to this review and
consideration of the price regulation methodology to apply from 1 July 2009 as
the "2009 Regulatory Reset".
Final Determination
In
accordance with clause 66(1) of the Electricity Networks
(Third Party Access) Code, on 31 March 2009 the Commission
released its
determination regarding the prices to be charged for
access to prescribed electricity networks operated by
the Power and Water Corporation during the five-year
period commencing 1 July 2009.
Revised Regulatory Proposal
As
required by the Draft Determination, Power and
Water submitted its ‘revised regulatory proposal’ to the
Commission for the third regulatory period covering all
of Power and Water’s regulated networks on 31
January
2009.
Draft Determination
The Commission has now released
its Draft Determination, based on whether or not it proposes to
approve Power and Water’s initial regulatory proposal and, if not, what
revisions it proposes to require before a revised regulatory proposal could be
approved by the Commission. This Draft Determination reflects the Commission's
consideration of issues raised in submissions on the Initial Draft
Determination. This Draft Determination is published in
conjunction with the recommendations from the Commission's advisers and a
revised Po adjustment model.
Power
and Water is now required to submit its Revised
Regulatory Proposal by Friday, 30 January 2009.
The Commission will then
consider whether or not to approve Power and Water's Revised Regulatory Proposal
and, if not, will develop the necessary determinations to give effect to an
approved set of arrangements to commence on 1 July 2009. The Commission's final
decisions and reasoning will be published in its Final Determination to be
published by 31 March 2009.
Initial
Draft Determination
In
October 2008, the Commission released an Initial Draft Determination.
Submissions on the Initial Draft
Determination were received from
two interested parties:
Initial Regulatory Proposal
As
required by the Final Methodology Decision, Power and
Water submitted its ‘initial regulatory proposal’ to the
Commission for the third regulatory period covering all
of Power and Water’s regulated networks on 22 August
2008.
Network Services
Classification
As required by the Commission’s
2009 Regulatory Reset: Final Price Control Mechanism Decision (published in May
2008), the Commission has approved the network services classification proposed
by Power and Water for the third regulatory period.
This is an interim approval -
the final network services classification for the third regulatory period will
form part of the Commission’s 2009 Regulatory Reset: Final Determination to be
released in November 2008.
Po adjustment model
The Commission’s Po adjustment model sets out
the manner in which Power and Water’s efficient costs of supplying standard
control services in a single regulatory year are to be calculated. As part of
its regulatory proposal, Power and Water must submit to the Commission a
proposed Po adjustment factor calculated using the Commission’s Po adjustment
model.
The Commission’s Po adjustment
model should be used in conjunction with the Commission’s Final Decision on the
price control mechanism to apply during the third regulatory period.
Following representations made
by Power and Water, the Commission has agreed to some refinements to the Po
adjustment model. The Po adjustment model version 2 incorporates these
amendments.
Price Control Mechanism
Decision
The
price control mechanism involves the practical and technical detail for the
administration of network price regulation over which the Commission as
regulator - in consultation with stakeholders - has a degree of discretion.
Submissions on the Draft
Decision were received from
three interested parties:
Issues Paper
In October 2007 the Commission
released an Issues Paper which is designed to identify the key issues within the
scope of the reset and to invite submissions on these issues.
Submissions were received from
three interested parties concerning the issues raised in this Paper.
Network Tariff Pricing
Principles and Methods
The Code assigns responsibility
for determining the pricing structure that best gives effect to the pricing
objectives of the Code to the network provider. Prior to the commencement of
each regulatory control period, the network provider must provide the regulator
with a draft statement setting out the details of principles and methods to be
used for defining individual standard network access services to be supplied by
the network provider and for establishing the reference tariffs to apply to
those services. The regulator must approve the statement for use by the network
provider unless, in the opinion of the regulator, the statement is not
consistent with the principles and objectives set out in the Code.
Power and Water provided a
draft Pricing Principles Statement to the Commission for approval as part of its
Revised Regulatory Proposal for the 2009 Regulatory Reset.
Following a period of public consultation on
the Revised Regulatory Proposal, the
Commission has approved the Pricing Principles Statement for use by Power and
Water during the third regulatory control period.
Network Tariffs
The Commission decided to
continue with a price cap form of regulation based upon a tariff basket in the
third
regulatory control period. Hence, the Commission’s price
regulation will be based on a calculation of each year’s weighted average
network access tariffs.
2009-10
Capital Contributions Tariff
Pricing Principles and Methods
Where the granting of access to
the network requires the provision of connection or system extension, a network
access applicant or network user may be required to make a capital contribution
in respect of the capital investment associated with the designing,
constructing, installing and commissioning of connection or system equipment
where the network provider can demonstrate that the extension would not be
commercially viable without that contribution.
Prior to the commencement of
each regulatory control period, the network provider must provide the regulator
with a draft statement setting out the details of principles and methods to be
used for establishing capital contributions. The regulator must approve the
statement for use by the network provider unless, in the opinion of the
regulator, the statement is not consistent with the principles and objectives
set out in the Code.
Power and Water provided a
draft Capital Contributions Principles and Methods Statement to the Commission
for approval as part of its Revised Regulatory Proposal for the 2009 Regulatory
Reset.
Following a period of public consultation on
the Revised Regulatory Proposal, the
Commission has approved the Capital Contributions Principles and Methods Statement for use by Power and
Water during the third regulatory control period.
Distribution System Extension Area Charges
Section 86 of the Electricity
Reform Act provides that the Minister may declare an area to be an electricity
supply distribution system extension area. The owner of each parcel of land
within such an area is liable to pay to the relevant electricity entity a
financial contribution towards the cost of extension of the electricity supply
in the area.
The reasonable contribution
payable by each land owner is the amount approved by the Commission as the
owner’s reasonable share of the capital contribution required, with the capital
contribution being determined in accordance with the capital contribution
principles set out in the Network Access Code.
The Commission has approved use
of the schedule of financial contributions set out in the Power and Water
Corporation’s Distribution System Extension Policy as complying with the
provisions of section 86(7) of the Electricity Reform Act, subject to some
conditions as set out in the approval instrument below.
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