Review of electricity distribution price-setting compliance statements

Project by Link Economics Group

economic regulation nz

Annual Price-Quality Path Price-Setting Compliance Statements Review, 2022-2023

Non-exempt electricity distribution businesses (EDBs) in New Zealand must ensure that they comply with revenue caps set by the Commerce Commission. Since 2020, these EDBs have been required to publish price-setting compliance statements at the beginning of each pricing year.

Link Economics has peer reviewed the price-setting compliance statements of multiple EDBs. We have done this by checking the methodology and calculations used to forecast revenue, including the approach to forecasting volumes. In some cases we reviewed the pricing or revenue model that the forecasts are sourced from. We also checked the calculation of the revenue cap (the “allowable revenue”) against the methodology and definitions in the relevant Commerce Commission Determinations, including the Incremental Rolling Incentive Scheme adjustments and the reasonableness of pass-through costs estimates.

While our review does not equate to an audit or a guarantee of the accuracy of the EDB’s calculations, it does provide an extra level of confidence to the EDB’s management and directors.

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