Commerce Commission approves increased revenue limits for electricity network investments

The Commerce Commission has released final decisions to increase revenue limits for Transpower and local lines companies, facilitating investment to maintain and upgrade New Zealand’s electricity network over the next five years.

Commissioner Vhari McWha emphasized that the measures aim to balance long-term consumer interests with the need for a resilient and efficient grid.

“Consumers rightly expect a safe and reliable network,” McWha said in a statement. “Deferring investment would mean even higher future prices and a network that does not meet their needs.”

The decisions will result in a rise in electricity bills, with the average household seeing an increase of approximately $10 per month in the first year of the five-year regulatory period beginning April 1, 2025. This will reduce to $5 monthly in subsequent years. Without the commission’s decision to smooth revenue recovery over five years, consumers could have faced $20 monthly increases.

Factors driving the increases include inflation, material costs, and borrowing expenses, which collectively account for 55 percent of the revenue adjustments. A growing population, more frequent extreme weather events, and the increasing use of electricity for transport and industrial processes have also heightened demands on the grid.

Transpower, the national grid operator, has been allocated a maximum allowable revenue of $5.9 billion over five years, a 44 per cent increase from the previous period. To manage consumer costs, annual revenue increases are capped at 16 per cent for the first two years and 5 per cent thereafter.

Transpower’s proposal to replace and renew critical infrastructure was supported by independent experts and robust asset management practices. However, McWha expressed concerns about workforce shortages affecting Transpower’s ability to deliver its work programme. The commission has adjusted the expenditure allowance to reflect this risk, with additional funds contingent on Transpower demonstrating successful recruitment.

Revenue limits for local lines companies total $11.5 billion, a 47 per cent increase in real terms over the previous five years. Smoothing measures cap first-year increases at 24 per cent, with smaller rises in subsequent years.

While not all forecasted expenditures were approved due to uncertainties about timing and necessity, the commission introduced measures to allow businesses to request additional revenue for unexpected demands or clearer investment needs.

An expanded innovation scheme aims to encourage cost-saving solutions, helping companies address network challenges and optimize existing infrastructure. The commission also approved funding for local lines companies to acquire low-voltage network data, enabling better service quality monitoring and more efficient investment decisions.