Comparative Business Information
Net Acquirers' Benefit
185. The benefits, costs and net acquirers' benefit assessed at the 25th percentile, mid and 75th percentile points of WACC for NGCT, NGCD, Vector, Powerco and Wanganui Gas are set out in Table 10.
Table 10: Net Acquirers' Benefit| | Annuity ($000) |
| 25th WACC | Mid WACC | 75th WACC |
| NGCT | | | |
| Total benefits | 8,278 | 5,170 | 2,062 |
| Total costs | 3,365 | 2,806 | 2,325 |
| NAB | 4,913 | 2,364 | -263 |
| NGCD | | | |
| Total benefits | 4,376 | 3,375 | 2,386 |
| Total costs | 1,986 | 1,775 | 1,603 |
| NAB | 2,390 | 1,600 | 783 |
| Powerco | | | |
| Total benefits | 6,927 | 5,892 | 4,896 |
| Total costs | 2,386 | 2,173 | 1,972 |
| NAB | 4,542 | 3,719 | 2,925 |
| Vector | | | |
| Total benefits | 11,721 | 10,047 | 8,457 |
| Total costs | 3,507 | 3,126 | 2,766 |
| NAB | 8,215 | 6,921 | 5,692 |
| Wanganui Gas | | | |
| Total benefits | 844 | 706 | 570 |
| Total costs | 580 | 551 | 523 |
| NAB | 264 | 155 | 47 |
Net Efficiency Costs to the Economy of Reducing Excess Returns
186. The Commission has found NAB for all businesses investigated. The positive NAB has been driven by excess returns as the net efficiency effect of control is always found to be negative. Table 11 highlights the trade off between the net efficiency effects and recoverable excess returns for each business.
Table 11: Net Efficiency and Recoverable Excess Returns Trade-OffVI| | NGCT | NGCD | Powerco | Vector | WGL |
| Recoverable excess returns ($000) | 3,629 | 2,455 | 4,395 | 7,489 | 527 |
| Net efficiency effect ($000) | -1,096 | -913 | -732 | -702 | -374 |
| Net cost of $1 transfer to acquirers | $0.30 | $0.37 | $0.17 | $0.09 | $0.71 |
| Times recoverable excess returns exceed efficiency effect | 3.3 | 2.7 | 6.0 | 10.7 | 1.4 |
Size of the Benefits
187. Table 12 shows the average returns earned by the businesses over the analysis period. The mid-point of WACC was 8% on average over the same period.
Table 12: Average Returns of the Businesses| Company | Average Returns on Capital |
| WGL | 11.8% |
| NGCD | 10.5% |
| NGCT | 9.1% |
| Powerco | 12.7% |
| Vector | 13.5% |
188. Table 13 shows the change in transmission and distribution prices to reduce the positive NAB for each business back to zero.
Table 13: Effect on Transmission/Distribution Prices| Company | Price Effect |
| NGCT | -3.5% |
| NGCD | -5.6% |
| Vector | -18.5% |
| Powerco | -12.2% |
| WGL | -0.2% |
189. Table 14 shows the impact in dollar terms of reducing prices to the point where NAB = 0 relative to the average annual consumption per connection.
Table 14: Reduced Annual Charges per Connection| | Average annual gain per acquirer | Average annual charge per acquirer |
| WGL | $1 | $323 |
| NGCD | $29 | $518 |
| NGCT | […] | […] |
| Powerco | $51 | $415 |
| Vector | $114 | $617 |
190. Table 15 shows the potential change in the delivered gas price to retail customers if both distribution and transmission prices were reduced to a point where NAB=0 in the Commission's model. This calculation assumes that transmission's share in the delivered gas price is 10%, while distribution's share is 40%.
Table 15: Effect on Final Delivered Gas Price (Transmission and Distribution Combined)| Company | Price Effect |
| NGCD | -2.6% |
| Vector | -7.8% |
| Powerco | -5.2% |
| WGL | -0.4% |
191. It should be noted that the calculations in this sub-section are made on the basis of bringing NAB back to zero, not to where the efficient level of price would be if the costs of control were ignored.
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