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Large Projects proposed approach

Large Projects proposed approach. Large projects proposed approach. Purpose of the session is to provide an overview of the proposed process for approval of a capital expenditure allowance for large projects

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Large Projects proposed approach

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  1. Large Projects proposed approach

  2. Large projects proposed approach • Purpose of the session is to provide an overview of the proposed process for approval of a capital expenditure allowance for large projects • The overview sets out the approach intended to apply in the longer term, transitional mechanisms that may apply are discussed in the next session

  3. Large projects proposed approach • Key points to be covered are: • Proposed ex-ante approach • Treatment of contingent projects • Treatment of emerging projects • Use of wash ups

  4. The Commission’s focus is at the business case level for large projects and at the qualitative governance and management level for minor projects Service level obligations Governance and Management Policies, strategies and procedures that deliver services required at least cost Business management Assessment and approval of expenditure plans and variations Projects subject to an investment test commensurate on the size of project Expenditure plans Minor Projects Expenditure plans Large Projects Engineering and technical Asset management planning and implementation Asset management data (condition, age, network loadings and performance etc.)

  5. Overview of the proposed review process Large projects Contingent projects and emerging projects are assessed on an individual basis at the end of the RCP. Contingent projects are included in a wash up. Prior to the regulatory period, Transpower provides large project and contingent project lists and supporting documentation Assessment considers Transpower’s application of the investment test and compliance with other relevant policies on an individual project basis Individual Project Allowances Approval of individual large projects on ex-ante basis for inclusion in the Maximum Allowable Revenue (MAR)

  6. Large Projects - summary Large projects includes both RRE and IST Expectation that projects will be able to be submitted ex-ante but acknowledgement that some may emerge during the RCP Demonstration that projects have been subject to an investment test (commensurate with project size)* Demonstration that appropriate policy and processes (e.g. procurement) have been complied with/completed * Under the proposed Electricity Industry Bill the GIT is to be applied until the Commission has developed a new input methodology.

  7. Large Projects – summary (continued) Contingent projects and triggers are to be identified ex-ante Wash up provisions included (note: only contingent projects included in wash up) Emerging projects will not be included in the wash up but will be included in the RAB and MAR for the subsequent RCP Expenditure approval is project specific Projects can be submitted at any time during the RCP** Large projects that are not commissioned in the period they are forecast to be are included in the wash up ** Contingent projects and emerging projects approved during the RCP, can be included in the RAB once commissioned and therefore in the MAR in the following RCP. Wash up provisions only apply to contingent projects.

  8. Large projects proposed approach Individual project approval (ex-ante) Approved projects that have successfully completed an investment test accepted for inclusion in the MAR MAR – and wash up Project approved expenditure included in MAR Wash up provisions to adjust for legitimate under and over spend. Projects not commissioned in the RCP included in the wash up Ex-ante project detailed information Submitted over a period and not immediately prior to RCP Individual project assessment Contingent project list and triggers Submitted over a period and not immediately prior to RCP Individual contingent project approval Contingent projects that have successfully completed investment test during the RCP Wash up provision Approved contingent projects undertaken during RCP included in the RAB used to establish the MAR in subsequent RCP with financially neutral wash up Contingent project list assessment Individual project approval Projects that have successfully completed investment test accepted for inclusion in the MAR No wash up Approved emerging projects accepted for inclusion in the RAB which is to be used to establish the MAR in subsequent RCP Emerging projects Projects that have completed required process stages and approvals during the RCP but were not approved ex-ante and are not contingent projects

  9. Discussion

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