Improving Management of Distribution Lines under Constrained Commercial Conditions using Innovative New Technology
The energy sector globally is one of the most important factors underpinning the world economy and relative competitiveness. Those countries rich in energy resources such as New Zealand and Australia have a significant advantage over many of their trading partners. Reliable and competitively priced energy supports business competiveness and lowers the cost of living, in turn helping to reduce the relative cost of labour.
In the Australian Government Energy White Paper (2014), a vision for the energy sector was defined as:
“Competitively priced and reliable energy supply to households, business and international markets through:
- Competition that will improve consumer choice and put downward pressure on prices
- The more productive use of energy to lower costs , improve energy use and stimulate economic growth
- Investment to encourage innovation and energy resources development to grow jobs and exports.
In New Zealand power industry regulation is managed by the Commerce Commission. Historically, the power sector is viewed as exhibiting low levels of competition and the Commerce Commission aims to regulate to ensure the price and quality of energy benefits consumers.
The type of regulation applied to New Zealand electricity business including Transpower and the 17 non-consumer owned distribution business is described as “price-quality regulation” and a key aspect is the regulation of the prices that utilities can charge customers using a “CPI-x” formula approach. This means that prices, or more precisely, revenue is restricted to increasing at a rate that is less than inflation (or CPI1) by a factor of “-x”, determined periodically by the Regulator based on arguments from the utilities.
This CPI-x approach to revenue means that utilities are ever more focused on winning arguments to the Commerce Commission but also seeking ways to reduce operating costs in the long term.