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No change proposed for information requirements on gas companies seeking customised price-quality paths

24 October 2017

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

The draft decision forms 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 businesses provide the Commission with sufficient information to assess whether a CPP application meets the necessary evaluation criteria and promotes the long-term benefit of consumers.

“As we have yet to receive any applications for a CPP from a gas pipeline business, we are proposing not to make any changes at this stage. Instead, we intend to revisit the requirements and consider whether any changes are necessary once we have completed a gas CPP. We consider this would result in a more effective process,” Ms Begg said. 

The Commission welcomes submissions on the paper by 7 November 2017 by email to regulation.branch@comcom.govt.nz. A final decision will be published in December 2017.

The draft decision can be found on our website.

Background

What are Input Methodologies (IMs)?

IMs are the upfront rules, requirements, and processes that apply to utility regulation in New Zealand. Under Part 4 of the Commerce Act, the Commission is required to set and apply IMs to gas pipeline businesses (distribution and transmission), regulated electricity lines services and specified airport services. IMs are only one part of the regulatory regime, with benefits delivered to consumers through the application of the IMs through price-quality and information disclosure regulation. 

What is the IM review?

The IMs under review were determined in December 2010. The IM Review is the opportunity to assess whether there are any necessary changes to the IMs to more effectively promote the long-term benefit of consumers. The Commerce Act requires the Commission to review each IM within seven years of its date of publication and, after that, at intervals of no more than seven years.  We issued the final decisions on the IM review in December 2016, except for three areas where we had not yet reached decisions, including CPP information requirements for gas pipeline businesses.

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 can apply to the Commission for a customised price-quality path to better suit their specific needs. For example, a business may need to invest more in its network than provided for under the default price-quality path or may have been affected by an event outside its control. Customised price‐quality paths are based on the Commission’s analysis of information specific to the business, and requirein‐depth audit, verification, and evaluation of the information provided by the regulated business. A fact sheet on this type of regulation is available here.