Electricity Lines Businesses: Commission releases thresholds decision paper
Published02 May 2003
The Commerce Commission today released a decision paper on the thresholds to apply as part of its regulatory regime for electricity lines businesses, as well as a draft Gazette notice that will be used to formally set the thresholds. This work is required under Part 4A of the Commerce Act.
The Commission has decided to adopt a price path threshold and a quality threshold.
Today's paper formalises the decisions announced by the Commission on 31 March 2003
(Media Release: Electricity lines businesses: Commission decides on thresholds (2003-03/132)). The paper also provides additional detail on how the thresholds will apply.
Interested parties are invited to comment on the draft Gazette notice by 16 May 2003. Comments are to be limited to technical drafting points to ensure the notice gives best effect to the Commission's decisions.
Today's decision paper also provides information on:
• the process the Commission will follow for resetting the price path threshold, and related issues. This information has been provided to assist interested parties in advancing their own work to input to the Commission's process. The Commission will reset the price path threshold to apply from 1 April 2004; and
• the process the Commission will follow for developing the detail of the investigation and control parts of the regulatory regime, including its views on WACC and asset valuation. The development of this detail is necessary for the implementation of those parts of the regime (if required), as well as to give guidance to electricity lines businesses on what consequences might follow a breach of the thresholds.
Media contact: Peter Alsop, Manager Network Performance
(04) 924 3676, mobile 025 725 767
Jackie Maitland, Communications Manager
Phone work (04) 924 3708, mobile 029 924 3708
Background
Part 4A of the Commerce Act 1986, which commenced on 8 August 2001, establishes the regulatory regime for large electricity lines business. The Commission is required, inter alia, to set thresholds and assess the performance of electricity lines businesses against those thresholds. If one or more of the thresholds are breached by an electricity lines business, the Commission could further investigate the business and, if required, control their prices, revenue or quality. In effect, the thresholds are a screening mechanism to identify electricity lines businesses whose performance may require further investigation and, if required, control by the Commission.
The Commission released a Discussion Paper on 21 March 2002 and held a public conference for interested parties to make their views known in mid-July 2002. The Commission released draft decisions on the high-level design of the thresholds on 23 December 2002 and draft decisions on implementation detail on 31 January 2003. The Commission sought submissions on its draft decisions; held a conference and invited cross-submissions.
The purpose of the regime, as set out in s57E 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.
Relevant media releases
Commission media releases, as well as relevant publications, can be viewed on its web site www.comcom.govt.nz. Relevant media releases include:
* 2003-03/132 - Electricity Lines Businesses: Commission decides on thresholds
