Connection works under the spotlight: Commission sets expectation for electricity distributors

The Commerce Commission ("the Commission") has published a letter addressed to Transpower and all electricity networks in New Zealand ("the Letter"). The Letter signals that the Energy Competition Task Force (jointly led by the Commission and the Electricity Authority) will set its sights on electricity connection works as a key focus in early 2027.

You can read the Commission's letter here.

What's behind the Commission's expectations?

The Commission recognises that electricity connections play an important role in economic development. The associated costs of acquiring or establishing a connection, measured in both money and time, can significantly impact businesses and consumers alike. Additionally, high costs in this sector can go on to impact competition in other sectors.

The Commission is therefore keen to promote consumer choice by allowing third parties to compete to provide connection works where that is possible. A key feature of the expectations is that networks should be clear and transparent about when services are open to competition. If they are not, then that position must be reasonably justified.

In that context, the Commission has provided a broader reminder to networks that they are likely to have substantial market power and that they need to be careful not to breach section 36 of the Commerce Act. We expect that, as network services continue to evolve and develop with technological progress, the Commission will maintain an ongoing focus on promoting competition in the provision of new services over networks.

What's in the Letter? 

In anticipation of the Energy Competition Task Force's focus on electricity connection works in early 2027, the Letter sets out six expectations the Commission has of electricity network operators in New Zealand. 

1. Consumer choice. Consumers should expect to have choice as to their connection works provider, wherever safe and practicable, so they can compare costs and timelines between competing providers. Network owners should make this choice clear to consumers.
2. Transparency about contestability. Incumbent networks must clearly identify which aspects of connections works (including civil works, low voltage work, and higher voltage work) are contestable and which are not. For non-contestable aspects, incumbent networks must explain why they are classified as such.
3. Non-discrimination. Networks must not favour their internal business units or their own contracting arms. All relevant information must be made available to approved third-party providers in a clear and timely manner, and on the same basis that that information is available internally. To ensure competing connection work providers are given equal treatment, networks with internal business units or their own contracting arms must have clear non-discrimination policies and procedures in place. Additionally, capital contribution policies should not favour the network's own contracting arm or internal business unit.
4. Reasonable technical and commercial requirements. Networks may set technical standards for the quality and safety of connections and impose commercial terms. However, these requirements must be reasonable and must not differentiate between what is required of third-party contractors and what is required of the network's internal business unit or contracting arm.
5. Accessible approval processes. The Commission expects that electricity networks would only reject an application to become an approved third-party on reasonable grounds. Electricity networks should therefore have clear, published processes for the approval of third-party providers. Additionally, smaller networks should consider approvals already granted by larger networks.
6. No cap on providers. There should be no cap on how many providers for contestable works can compete at any given time.

Next steps

The Commission welcomes reactions and responses to the expectations set out in the Letter.

If you have any questions about the Letter, or how the Commission's expectations may affect you or your business, please reach out to one of our experts or your regular Russell McVeagh contact. 

This content is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter, please contact a Russell McVeagh partner/solicitor.