1. Transpower New Zealand Ltd March 2005
Oral Submission to the Commerce Commission: Information Disclosure and Asset Valuation Choice
Transpower New Zealand Ltd
March 2005

2. Oral submission structure
Asset valuation choice
Key points
Information disclosure
Information Disclosure and Asset Valuation Choice, March 2005

3. Asset valuation choice

4. Key points on valuation choice: Draft decision on IHC
Transpower does not contest the draft decision that the choice of valuation methods be limited to ODV and indexed historic cost (IHC)
The rationale for Transpower adopting an HC-based methodology is compelling and unconnected to issues that may impact valuation options or choices relevant to other lines businesses
Transpower urges the Commission to conclude this process as soon as practicable
continuing uncertainty now creates the risk of inconsistency with the evolving Electricity Commission regime
Information Disclosure and Asset Valuation Choice, March 2005

5. Key points on valuation choice: Alignment of regimes
Draft decision should be modified to recognise explicitly the need to coordinate the threshold regime and Part F
In particular, the final decision should recognise explicitly that the Grid Investment Test (GIT) as the sole test for establishing the prudency and efficiency of transmission investment
Information Disclosure and Asset Valuation Choice, March 2005

6. Information Disclosure

7. Key points on information disclosure Integrated development
Transpower falls under the ambit of both the Commerce Commission and the Electricity Commission
Transpower is concerned to ensure that this overlap does not create inefficiencies and unnecessary compliance costs
Where the objective of Information Disclosure has been addressed under Part F of the EGRs no further information disclosure requirement should be imposed
Information Disclosure and Asset Valuation Choice, March 2005

8. Key points on information disclosure Comparability
Transpower is a unique business in the New Zealand electricity industry
its performance measures are quite different to those used by distribution lines businesses
separate approach to the design of the information disclosure regime for transmission
Information Disclosure and Asset Valuation Choice, March 2005

9. Key points on information disclosure Financial disclosures
Departures from GAAP should be kept to a minimum
regulatory financial measures that depart from GAAP are likely to be subjective, difficult to implement and therefore costly to apply
Focus should be on asset valuation and a statement of financial performance
regulatory balance sheets and cash flow statements are likely to involve arbitrary apportionments of GAAP balances
Information Disclosure and Asset Valuation Choice, March 2005

10. Key points on information disclosure Quality measures
Key objective should be integration with the Part F regime
Transpower refers the Commission to the ACCC “Service Standards Guidelines”, November 2003
Transpower recommends that reliability measures under the existing Information Disclosure regime relating to uneconomic generation be removed
Information Disclosure and Asset Valuation Choice, March 2005

11. Information Disclosure and Asset Valuation Choice, March 2005
Key conclusions
Transmission is not comparable to distribution and decisions in respect of valuation and ID should recognise this
The key message is the need for the two Commission’s to create explicit coordination between their regimes
Most importantly, this applies to prudency testing of investment – where it is “hard to explain” why the same role needs to be performed independently by two Commissions
Information Disclosure and Asset Valuation Choice, March 2005