21 Nov 2023
Transpower today submitted its proposed expenditure and service performance levels to the Commerce Commission for the five years beginning 1 April 2025.
The proposal sets out up to $4.7 billion of spending, in constant 2022/23 dollars, in order to continue to provide a reliable and safe national electricity transmission service.
Transpower Chief Executive Alison Andrew said the next regulatory period will see intensified work on the national electricity transmission grid to replace or upgrade ageing assets.
“Much of the national electricity transmission grid was built between the 1950s and 1970s and now requires an increasing level of replacement and refurbishment work over the next 10 to 15 years to ensure the ongoing safe and reliable performance of the network,” she said.
“The work that we will undertake during the next regulatory period is critical to ensuring New Zealanders continue to have a safe and reliable national grid. It is also an essential foundation for any future enhancements to the grid to support electrification and New Zealand’s transition to a net zero carbon future,” Ms Andrew said.
The proposal forecasts capital expenditure of $2.25 billion across the five years, up 32 per cent compared to the current regulatory period, and $1.96 billion in operating expenditure, up 20 per cent. Another $490 million has been identified for additional reliability, resilience, and enhancement projects that are likely to be delivered in this period.
Alongside the growing work programme, these increases reflect that Transpower’s costs have increased through higher interest rates as well as inflationary pressures throughout the supply chain.
“We’re conscious of costs for our customers and have consulted extensively with them. This is essential work to ensure a safe and reliable electricity grid and our investment proposal provides the most cost-effective outcome over the long term.
Transmission charges currently represent 8% of the average household electricity bill and Transpower forecasts this will rise to an estimated 10% of the average bill during 2025, an increase of around $7 per month.
“Deferring investment might delay price increases now, but it would come at an increased cost and a less reliable grid over the long term,” Ms Andrew said.
Ms Andrew said pressure on materials and workforce availability will also present challenges for Transpower and the wider industry and plans are already underway to ensure the work programme can be delivered.
“We are working together with our partners throughout the electricity industry to support initiatives during the next regulatory period that will grow our industry’s capacity and capability,” she said.
“This includes strategies to manage and support supply chain challenges across the sector. We particularly see a strong need to continue investing in the electricity workforce and ensure project delivery is not limited by workforce availability.”
Transpower consulted widely with customers and others in the electricity industry to develop the expenditure proposal and ensure the proposed service levels were appropriate. The proposal was also reviewed by an independent verifier, who concluded it is consistent with good electricity industry practice.
Ms Andrew thanked customers and stakeholders who had contributed feedback during development of the expenditure proposal to ensure it met and reflected their needs.
Transpower’s regulation
Under Part 4 of the Commerce Act, Transpower is required to provide a five-year expenditure and quality of service proposal (for refurbishment and replacement) for the Commerce Commission to review. The Commission uses this information and its own analysis to determine Transpower’s expenditure allowances and service levels, which in turn determine the revenue Transpower will be able to recover from the industry.
Transpower is currently operating in its third Regulatory Control Period (RCP3) which finishes on 31 March 2025. Regulatory Control Period 4 (RCP4) covers five years from 1 April 2025.
The Commerce Commission will consult on Transpower’s proposal before releasing its final decision in late 2024.
For more information, please contact:
Rachael Drummond, Senior Corporate Communications Advisor, 021 394 803.