Part 4A of the Commerce Act 1986 (“the Act”) came into effect on 8 August 2001 and, among other things, requires the Commerce Commission (“Commission”) to implement
a targeted control regime for the regulation of large electricity lines businesses (lines businesses) – namely electricity distribution businesses (distribution businesses) and Transpower New Zealand Limited (Transpower).
The Targeted Control Regime
The purpose of subpart 1 of Part 4A is to promote the efficient operation of markets directly related to electricity distribution and transmission services through targeted control for the long-term benefit of consumers by ensuring that suppliers:
(a) are limited in their ability to extract excessive profits; and
(b) face strong incentives to improve efficiency and provide services at a quality that reflects consumer demands; and
(c) share the benefits of efficiency gains with consumers, including through lower prices.
As part of the targeted control regime, the Commission
must set thresholds for the declaration of control in relation to lines businesses, assess those businesses against the thresholds it has set, identify any business that breaches
the thresholds, and determine whether or not to make a declaration of control in relation to all or any of the goods or services supplied by a lines business identified as having breached a threshold.
The thresholds are effectively a screening mechanism for the Commission to identify lines businesses whose performance may warrant further examination and, if necessary, control.
On 6 June 2003, after consulting with interested parties as to possible thresholds, the Commission set two thresholds
– a CPI-X price path threshold and a quality threshold –applicable until 31 March 2004 for distribution businesses, and 30 June 2004 for Transpower.
These initial thresholds were set by the Commerce Act (Electricity Lines Thresholds) Notice 2003 published as a Supplement to the New Zealand Gazette, 6 June 2003, No. 62, page 1685.
The Commission reset the thresholds for all distribution businesses for a five-year regulatory period from 1 April 2004, and for Transpower from 1 July 2004 for a period of one year.
The 2004 reset thresholds for Transpower were set by
the Commerce Act (Transpower Thresholds) Notice 2004 published as a Supplement to the New Zealand Gazette,
30 June 2004, No. 81, page 2019. Transpower’s thresholds were reset for a further one year period from 1 July 2005.
The 2005 reset thresholds for Transpower were set by
the Commerce Act (Transpower Thresholds) Notice 2005 published as a Supplement to the New Zealand Gazette,
29 June 2005, No. 98, page 2277.
Before making a declaration of control, the Commission is required under section 57I to:
? publish its intention to make a declaration and invite interested persons to give their views on the matter; and
? give a reasonable opportunity to interested persons to give those views; and
? have regard to those views.
Intention to Declare Control
Transpower New Zealand Limited owns and operates
New Zealand’s high-voltage electricity transmission network (the National Grid), linking generators to distribution companies and major industrial users. Transpower is a State-Owned Enterprise.
The Commission has assessed Transpower against the
initial thresholds set from 6 June 2003, and has identified Transpower as having breached the price path threshold at the first assessment date (6 September 2003) and the second assessment date (30 June 2004).
In addition, the Commission has assessed Transpower against the thresholds from 1 July 2004, and has identified Transpower as having breached this reset price path threshold at the third assessment date of 30 June 2005.
Having undertaken analysis following the price path threshold breaches, the Commission has formed an intention to make a declaration of control in respect of electricity transmission services supplied by Transpower and is inviting interested persons to give their views on the matter.
Time and Manner for Interested Persons to
Give Their Views
The Commission will release a paper setting out the
reasons for its intention to declare control, which will be based on the Commission’s preliminary conclusions from
its post breach inquiry and analysis undertaken to date.
This paper will be released on or about 27 January 2006.
There will be a submission period on the paper in order
to give interested persons a reasonable opportunity to give their views.
The due date for written submissions is Wednesday,
15 February 2006 at 5.00 p.m.
Cross-submissions will be due by Tuesday, 22 February 2006 at 5.00 p.m.
The Commission will aim to make a final decision and publish its decision paper by Friday, 17 March 2006
at 5.00 p.m.
Any comments and questions on this notice may be sent
by email to:
electricity@comcom.govt.nz
or by post to Network Performance Group, Commerce Commission, P.O. Box 2351, Wellington; or by facsimile (04) 924 3700.
Submission requirements are:
? electronic copies of submissions should ideally be sent in PDF format, although Word is equally acceptable. Written or non PC-generated submissions will be scanned by Commission staff and converted to PDF;
? a single hard copy should only be supplied if it is not possible to provide submissions electronically. Submitters need only staple in the top left corner, as spiral or spine bound copies will be unbound for ease of producing additional copies if required;
? all submissions will be published on the Commission’s web site (the Commission recognises that there
will be instances where information may genuinely be confidential. The Commission requires parties to provide a “public version” of confidential material, which at least conveys the thrust of the material (or argument) without disclosing sensitive information. This public version should be given to the Commission when an application for confidentiality of that information is sought); and
? submissions must show the organisation’s name and address, date and be duly signed. In the case of personal submissions, a contact address and telephone number
is required, and the submission is to be signed with
the submitter’s name printed beneath the signature. Personal submissions will have their contact address and telephone number removed for the purpose of publishing on the Commission’s web site, as only their name will be disclosed.
Electronic copies of submissions should be emailed to:
electricity@comcom.govt.nz
Hard copies of submissions should be mailed to:
Transpower Intention to Declare Control, Network Performance Group, Networks Branch, Commerce Commission, P.O. Box 2351, Wellington.