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Status quo confirmed for gas companies seeking customised price-quality paths

13 December 2017

The Commerce Commission has released its final decision not to amend the information requirements applying to gas pipeline businesses who apply for a customised price-quality path (CPP).

The decision is part of the review of Input Methodologies (IMs), which are the upfront rules, requirements and processes that apply to businesses the Commission regulates in markets with little or no competition.

Commission Deputy Chair Sue Begg said the information requirements ensure regulated gas companies provide the Commission with sufficient information to assess applications for a CPP.

“We have carefully considered feedback received from the industry about aligning the requirements with information disclosure requirements and those that exist for regulated electricity lines businesses,” Ms Begg said.

“However, we consider it would be more cost efficient and in the best interest of consumers to conduct a single review of the requirements following a CPP application by a gas pipeline business.”

“In the meantime, we believe the modifications and exemption provisions provide for a flexible approach to CPP information requirements. This flexibility is likely to reduce time and costs, making for a more cost-effective CPP process overall.”

The final decision can be found on our website.

Background

What is the IM review?

The IMs under review were determined in December 2010 and must be reviewed within 7 years of being set. The IM Review is the opportunity to assess whether there are any necessary changes to more effectively promote the long-term benefit of consumers. 

What is price-quality regulation?

Price-quality regulation is designed to ensure businesses operating in markets with little or no competition have similar incentives and pressures to those operating in competitive markets to innovate, invest, and improve their efficiency. It aims to limit the ability of suppliers to earn excessive profits by setting the maximum revenue they can recover from their customers and the minimum quality standards they must meet.

What is a customised price-quality path?

Regulated businesses subject to price-quality regulation usually have their maximum revenue and minimum quality standards set in a default way. However, in applying for a customised price-quality path, the Commission must take account of their specific circumstances to determine a new set of prices and quality standards. More information about customised price-quality regulation can be found on our website.