New Zealand Gazette – 1996 – No. 172

Page 4535

✨ Financial Guidelines for Cost Allocation and Pricing Methodologies



29 NOVEMBER NEW ZEALAND GAZETTE 4535

  • Corporate services (human resources, computer services, finance, strategic planning advice, generation scheduling, etc).
  • Marketing services (where ECNZ information is used).
  • Costs of construction management and external overview.
  • Costs of shared management of fuel resources and catchment.

Guideline for Treatment of Opening Balance Sheet (including Pre-Incorporation Costs) and Ongoing Asset Transfers

16 Assets used primarily by the RFE will be passed to the RFE. Assets passed at any time from ECNZ to the RFE (and vice versa) will be transferred at book value.

17 After Board approval has been given for the establishment of the RFE, all relevant pre-incorporation costs directly related to the RFE, will be capitalised in the balance sheet of the RFE and amortised in accordance with recognised accounting standards as per paragraph 9. Note that the relevant pre-incorporation costs will include all costs that under ECNZ policy would be capitalised. ECNZ will not absorb or write off any pre-incorporation costs related to the RFE in such a way as to give an effective subsidy, and hence gain for the RFE a competitive advantage.

18 Typical pre-incorporation costs could include:

  • Planning costs.
  • Site evaluation costs.
  • Costs of obtaining water and other rights.
  • Costs of scoping and feasibility studies.
  • Design costs.

Guideline for Determining Commercial Rate of Return

19 The RFE will use the same methodology as used by ECNZ for determining its commercial rate of return, adjusted for the capital structure and investor profile of each RFE.

20 ECNZ will satisfy the independent auditor that:

a the methodology has been properly applied, including that all relevant variables have been properly derived. The required commercial rate of return will be calculated assuming the RFE is an independent taxpayer, irrespective of its actual tax status; and

b the RFE is forecast to achieve a rate of return over its life which is consistent with its required commercial rate of return.



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💰 Financial Guidelines for Cost Allocation and Pricing Methodologies (continued from previous page)

💰 Finance & Revenue
Cost Allocation, Pricing Methodologies, Independent Auditor, Costing Model