what if we’d had price control in the good old days ?? a light-hearted look at the nz power lines...
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What if we’d had price controlin the good old days ??
A light-hearted look at the NZ power lines industryin the early years of the 20th century
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South Canterbury Electric Power Board, about 1927
C’mon Cyril … we’ve got to out-perform the economy-wide
efficiency gain by 2.3%
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110kV line construction near Levin, about 1924
Hey George, what d’ya reckon the efficiency claw-back on this would
be ?
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Addington transformer workshop, 1930’s
Remember to roll this into the RAB at standard cost, Harry
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Hutt Valley Electric Power Board’s first pole, Petone, 1924
Ya know, indexed historical cost could be a suitable replacement
for RAB, Fred.
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Waitemata Electric Power Board erecting pole, possibly 1920’s
Well Tom, I’m really not convinced that Government Bonds are a
good proxy for the risk-free rate.
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Bay Of Plenty Electric Power Board’s pole factory, 1927
Now remember, guys - your efficiency gains will be shared with customers at the next price re-set.
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Wanganui Rangitikei Electric Power Board line gang near the Woollen Mill at Aramoho, 1925
So tell me again, Percy, why does the most efficient capital structure have
60% debt ?
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Waitaki Electric Power Board, 1925
Hey guys, I’m a bit worried that we might have over-run the efficient
bench-mark cost for this job.
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Laying cables in Auckland, 1908
Hey, Bill, I’m sure the price increase of bitumen is way above
CPI
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Southland Electric Power Board erecting poles, 1920’s
C’mon Albert, I’ll bet ya £2 that a hypothetically efficient new entrant wouldn’t do this.
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Franklin Electric Power Board first pole, 1925
Des, are you sure you considered the efficient non-network
alternative ?
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North Auckland Electric Power Board trucks at the Mangawhai pub, 1946
Guess we’d better hold off those
efficiency gains until after the next re-set
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Wellington Municipal Electricity Department erecting a pole, 1935
Hopefully this won’t get optimised out of the RAB
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Ashburton Electric Power Board erecting a pole, 1935
Well, Eric, my view is that we really do need to allow for non-
diversifiable risk when estimating the WACC.
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Marlborough Electric Power Board erecting its first concrete pole, 1920’s
I reckon we could really do with a valuation methodology that safe-harbors marginal assets, George
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Marlborough Electric Power Board erecting its first concrete pole, 1920’s
For insights on how price regulation works today, contact Phil Caffyn…
Phone (07) 854-6541 Email [email protected] Web www.utilityconsultants.co.nz