Firstgas announced today it has filed an appeal of the Commerce Commission’s input methodologies (IM) decisions released in December 2023.
Firstgas is a regulated business and owns New Zealand’s gas transmission system and some gas distribution networks. The input methodologies set the rules that apply to regulated businesses, including gas pipelines.
In its December 2023 decisions, the Commerce Commission decided to change from its long-standing approach to estimating the weighted average cost of capital, or WACC. WACC is a key input into the maximum revenue that gas infrastructure owners earn on new and existing assets.
Ben Gerritsen, GM Customer and Regulatory said, “The decisions that the Commerce Commission makes have a significant impact on the value of Firstgas and its ability to invest in assets for the benefit of consumers. In this case, the Commission has changed the approach to estimating gas pipeline WACC applied since the input methodologies were first determined in 2010.
“We believe that the rules should only be changed where there is strong evidence supporting the change and, in this case, we see no evidence to support the change that the Commission has made.”
As part of its appeal, Firstgas argues that the Commission has incorrectly concluded that the previous approach to calculating WACC was not warranted for gas pipelines given the relatively high levels of reliability and consequent lower cost of outages.
Gerritsen said, “Through our engagement with gas consumers we know how important it is for our gas networks to provide high levels of reliability, and the substantial costs incurred when pipeline outages occur. This requires ongoing investment, so ensuring the right signals to invest is critical.”
ENDS