23 Jun 2014

Delay in rate of return decision

1:14 pm on 23 June 2014

The Commerce Commission has delayed its draft decision on the appropriate rate of return for assessing the profitability of energy networks firms and other monopoly providers.

The regulator had expected to have a decision out on Monday, but will now put one out on 22 July.

Instead, it released some independent reports on establishing the weighted average cost of capital, or WACC, which is used for setting the price energy and telecommunications network firms and airports can use when setting prices.

Network providers have argued the Commission's rate of return on their assets are too low to encourage investment.

In 2013, the High Court questioned the Commission's use of the 75th percentile estimate of the WACC, saying the evidence did not sufficiently support its use, and that it might be at odds with the Part 4 objective of the Commerce Act to limit the ability of regulated suppliers to earn excessive profits.

At this stage, the Commission has no view on whether the percentile should be higher, lower or stay the same.

The Commission says a decision of rate of return for some airport services will be delayed further, but no date has yet been set.