Published 1 June 2010
The Commerce Commission said yesterday it had reached an important milestone in setting a new regulatory regime for airports under part 4 of the Commerce Act. The commission has published its draft decisions & reasons on the input methodologies that will be applied to the information disclosure requirements for airports. The commission has also released its draft information disclosure requirements & associated reasons.
Auckland International Airport Ltd said its initial review indicated the draft determinations were broadly consistent with the emerging views paper the commission published in December 2009. But chief financial officer Simon Robertson said Auckland Airport “remains of the view that airports need to have the correct commercial incentives to ensure they make the necessary infrastructure investment for the benefit of travellers & other airport users, and the broader New Zealand economy”.
In relation to input methodologies, the key draft decisions that underpin the information disclosure requirements are that:
the initial regulatory asset value for each airport will be the value of non-current assets included in the airport’s 2009 disclosed financial statements ,with an adjustment to the value of land using a market value alternative use (MVAU) valuation methodologyairports must revalue non-land assets annually using CPI indexation, and may revalue land before the start of a new pricing period using an MVAU methodologyairports must allocate costs by applying an accounting-based approach to cost allocation using causal factorsan airport’s tax obligations must be estimated using a tax-payable approach, andthe commission will produce & publish vanilla & post-tax cost-of-capital estimates of a 5-year term for each airport on an annual basis, using the simplified Brennan-Lally model.
In relation to information disclosure, the key draft decisions are that airports will need to publicly disclose:
historical financial performancequality measures, including passenger satisfaction survey results, reliability, capacity & utilisation, and operational improvement measuresforecasts of their total revenue requirements (& related assumptions) after they have gone through their required consultation processes and set their pricesprices & pricing methodologies; andother key statistics.
When disclosing the financial information, airports will be required to apply the input methodologies set by the commission, except the input methodology for the cost of capital. The commission said it had received detailed submissions from parties with differing views, and now moved into the most important part of the consultation process – a full critique of the commission’s draft decisions. Commission chairman Mark Berry said: “Given that this is a totally new regime, the commission has engaged leading independent international experts to provide their views, which parties will also have the benefit of in preparing their submissions.” Dr Berry said the commission was working to a very tight statutory timeframe to determine the new regime for airports. Following a further round of submissions & cross-submissions, the commission intends to issue its final decisions on input methodologies by 31 December and information disclosure by 1 January. Earlier stories:
24 December 2009: Dialogue continues on methodology at heart of airport land valuation
6 September 2002: Airport company fires more shots at Commerce Commission
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Attribution: Commission & Auckland Airport releases, story written by Bob Dey for the