NZIER report on compensation for transmission infrastructure
NZIER report on compensation for transmission infrastructure
NZIER report on compensation for transmission infrastructure
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5.1 Costs of periodic payments<br />
We start with the assumpti<strong>on</strong> that, in present value terms, lump-sum payments are<br />
equal to the net value of all future periodic payments.This may not always be the<br />
case, but it is the best approach to valuing future revenue streams at a point in time.<br />
Trying to c<strong>on</strong>sider additi<strong>on</strong>al factors may lead to double counting and increased<br />
variability.<br />
Transpower pays compensati<strong>on</strong> based <strong>on</strong> the assumpti<strong>on</strong> that there is no difference<br />
between lump-sum and rental payments. In other words there will be no increase in<br />
the amount of compensati<strong>on</strong> that Transpower is required to pay if it shifts from lumpsum<br />
to periodic payments.<br />
As such, the main additi<strong>on</strong>al costs of renegotiating easements and awarding<br />
payment annually with periodic adjustments will be <strong>for</strong> setting up processes and<br />
administrati<strong>on</strong>. These include:<br />
Development costs – additi<strong>on</strong>al costs to Transpower of designing and establishing<br />
a process <strong>for</strong> managing the new compensati<strong>on</strong> arrangements<br />
Management costs – additi<strong>on</strong>al costs to Transpower of administering, reviewing<br />
and amending payment amounts every five years<br />
Dispute costs – a reducti<strong>on</strong> in the <strong>on</strong>going negotiati<strong>on</strong> costs to Transpower and<br />
landowners of resolving compensati<strong>on</strong> disputes<br />
Uncertainty costs – increased cost to Transpower of bearing the risk of easement<br />
rental costs increasing by more than estimated, currently a cost to landowners.<br />
Labour costs in the following have been estimated at $1,400 per week, somewhat<br />
more than the average weekly earnings of $1,110 <strong>for</strong> male professi<strong>on</strong>al, technical,<br />
administrative and support services staff (larger companies tend to pay higher than<br />
average wage rates). 27 A further 20 percent, or $1,200 per m<strong>on</strong>th, is added <strong>for</strong> n<strong>on</strong>wage<br />
labour costs, <strong>for</strong> offices, equipment, technical support, kiwi-saver etc. 28<br />
Legal labour costs have been estimated at an average of $1,850 per week,<br />
somewhat greater than the New Zealand in-house counsel wage of $85,000 per<br />
year. 29 $1,600, 20 percent of this amount is added as n<strong>on</strong>-wage labour cost <strong>for</strong> legal<br />
advice services per employee per m<strong>on</strong>th.<br />
5.1.1 Development costs<br />
The following development costs are based <strong>on</strong> the assumpti<strong>on</strong> that both parties have<br />
agreed in principle to annual payments and are willing to reach settlement. The<br />
following costs are <strong>for</strong> developing a process that is applicable to as many or as few<br />
landowners as require compensati<strong>on</strong>.<br />
27 Statistics New Zealand infoshare at http://www.stats.govt.nz/infoshare<br />
28 According to Statistics New Zealand n<strong>on</strong>-wage labour costs make-up approximately 20% of total<br />
labour costs.<br />
29 Trademe New Zealand salary guide at http://www.trademe.co.nz/Trade-me-jobs/Salary-<br />
guide/index.htm<br />
<str<strong>on</strong>g>NZIER</str<strong>on</strong>g> – Compensati<strong>on</strong> <strong>for</strong> transmissi<strong>on</strong> <strong>infrastructure</strong> 38