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December target for final electricity lines valuation method

Commerce Commission delivers no preference between historic & replacement cost options

The Commerce Commission wants to present its final report on electricity lines valuation methodology by the end of the year.

In airport fixed asset pricing the commission opted for historic cost over replacement cost as a valuation methodology, upsetting Auckland International Airport Ltd. At this stage it hasn’t stated a preference for the electricity industry, but has stated what it sees as sensible parameters and possible options.

The commission released a discussion paper on electricity lines business fixed asset valuation last week and is seeking written submissions by Monday 4 November. It plans to receive oral submissions from 25-29 November then issue the final report within a month.

The commission’s discussion paper is available in PDF form on the electricity lines business section of its website (start at Reports & Documents then hit the latest discussion paper at item 6; the directions the commission gave in newspaper advertising this week don’t lead anywhere).

At the end of the 117-page discussion paper is a list of 102 questions the commission poses on valuation.

For Transpower, it said a pure historic cost approach was unlikely to be feasible. For the rest of the industry, the commission has presented no clear winner.

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