Commission publishes performance analysis of gas distribution companies

The Trade Commission has today published
information to help consumers and other interested stakeholders understand the performance of the four regulated gas distribution companies as they prepare to consult on a new price and quality trajectory that is to come into effect from October 2022.

This information allows consumers to compare the performance of gas distributors and provide a comprehensive overview of the sector through a range of metrics. It includes revenues and profitability, capital and operating expenses, asset condition, and network reliability and service.

Commissioner Sue Begg said the analysis was the first of a number of tools and reports for the gas distribution sector that the Commission intends to produce this year, as it consults the industry and stakeholders on resetting the industry’s default price-quality trajectory in May 2022 to take effect in October of this year.

“This information will help know if gas companies are performing at the level their customers expect them to do and will also help parties engage with us as we define the next best value-for-money default pathways for businesses.” gas, ”she said.

The Commission establishes price-quality trajectories for companies that are regulated under Part 4 of the Trade Act. The five-year reset of price-quality trajectories sets the maximum revenues and minimum quality standards that gas distribution companies must meet.

Further information on the general context of the default price-quality trajectory for the sector is covered by the Commission open letter April 29, 2021.

Ms Begg said that this performance information, along with other information the Commission plans to make available, will also help the Commission, pipeline companies and consumers to assess the effectiveness of the default price-quality parameters. .

“Our experience in other sectors that we regulate, such as electricity and telecommunications, shows that making performance information of this type available to consumers and to the industry as a whole ultimately leads to better results and is a key part of our regulatory toolkit, ”said Ms. Begg.

Additional performance information the Commission plans to release later this year includes an analysis of what has driven the price changes since 2013 and an examination of how and why the price and quality results in the sector differed from the forecasts used when the last two prices. quality paths have been traced.

The performance summaries are based on data the Commission has collected from the five pipeline companies under the Disclosure Regulation since 2010 and are supported by a publicly available database.

The Commission published similar performance information for regulated local power companies March 21, 2021.

Context of the default quality-price routes of gas pipelines

The Trade Commission sets default price-quality (PLR) trajectories for all pipeline companies in New Zealand as part of regulation under Part 4 of the Trade Act.

They aim to influence the behavior of these companies by setting the maximum average price or the total allowable revenue that they can charge. They also establish service quality standards that each company must meet.

The main components of a default price-to-quality (DPP) path are:
• the maximum prices / revenues allowed at the start of the regulatory period (i.e. starting prices)
• the annual rate at which the maximum allowable prices of all gas distribution and transmission companies may increase (i.e. the rate of change) – this is expressed as ‘CPI-X’ ‘, which means that prices cannot increase each year by more than the rate of inflation minus a certain number of percentage points (called the “ X factor’ ‘)
• the minimum quality of service standards to be observed.

We need to determine a new price-quality path for gas pipeline companies by the end of May 2022. The new PLR will come into effect on October 1, 2022 and expire on September 30, 2027. The current PLR came into effect on October 1 2017 and expires September 30, 2022.

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