1. Safety-net facility

2. The need for a safety-net
The key purpose of a safety net is to protect consumers from higher than necessary prices over the RCP
Applies to minor capital expenditure allowance
The Commission is considering a safety net because:
Ultimately a wash up will not be used*
Over the term of the settlement Transpower has not been able to demonstrate accurate forecasting of its capital expenditure
The Commission considers that the safety net would place incentives on Transpower to improve the accuracy of its planning and not inflate its proposed expenditure levels
* a safety net and a wash up may act in a similar way to protect consumers, a key difference is that a safety net would only apply to correct under, and not over, spending.

3. Safety-net facility
If the actual spend during the RCP falls materially below the level of the Capital Expenditure Allowances then the Commission may, at its discretion, reopen the Capital Expenditure Allowance(s) for any year(s) during the RCP
The Commission will undertake a review and, if necessary, make adjustments to the MAR during the RCP.

4. A safety net option A safety net is used in the UK
Triggered in the event annual expenditure is more than 20% below the capex allowance for that year
Ofgem has discretion as to whether to reopen the revenue determination
A NZ safety net provision could apply where the following occurs:
X% under-spend, of the annual expenditure allowances (total Grid Asset, IST, and by Asset Group) across both years, over a rolling 2 year period, or
X% under-spend of the (total, Grid Asset, IST, and by Asset Group) annual expenditure allowance in any one year.

5. Discussion