Reducing barriers for new connections: WACC estimate for connection charge reconciliation

From 1 April 2026, distributors will need to provide a standardised breakdown of connection charges to the Authority and connection applicants on request.

This breakdown (reconciliation) must include incremental costs, incremental revenue and network costs, and be updated annually and adjusted for inflation.

We initially proposed distributors use the mid-point estimate of the weighted average cost of capital as part of this requirement.

However, following feedback on the Code drafting, one submitter recommended that the 65th percentile would be more appropriate to use as an estimate, as it aligns with the Commerce Commission’s use of the weighted average cost of capital (WACC) when setting regulatory allowances.

We consider this proposed change would improve consistency between the two regulatory regimes and help keep total system costs as low as possible.

While we seek views on the proposed amendment to WACC percentile, and prior to any further Code change, distributors should adopt the estimate consistent with the Code that applies from 1 April 2026.

Details on this proposal are in chapter 8 of the paper below.

We invite submissions on this proposal to connection.feedback@ea.govt.nz by 5pm, Friday 20 March and cross-submissions by 5pm, Wednesday 8 April.