Central Electric seeks exemption from Electricity Industry Reform Act
Published19 Nov 1998
The Commerce Commission has received an application from Central Electric Limited for an exemption from the Electricity Industry Reform Act (EIR Act) so that it can buy the Monowai Power Station from The Power Company Limited.
Commissioner Dr Kate Brown said that this is the second application made to the Commission for an exemption from the EIR Act. The first was made last week by Alpine Energy Limited and its principal shareholder, the Timaru District Council, for exemption for the Ophuha Dam and Power Station.
Central Power is owned by the Otago Central Electric Power Trust. It owns electricity generation, lines and retail businesses, supplying 18,000 customers in Central Otago.
The EIR Act requires companies to put in place corporate separation of their lines businesses from their generation and retail businesses, or to have obtained an exemption from the Commission, by April 1 next year.
The Commission has not yet estimated the date by which it expects to make its decision.
Dr Brown has previously said that in the absence of experience in processing applications for exemptions, the Commission expects the process to proceed slowly and deliberately for the first few at least.
In considering an exemption, the Commission must answer three questions:
1. Would the exemption inhibit competition?
2. Would the exemption allow cross-subsidisation between electricity generation and lines businesses?
3. Would the exemption create a relationship between electricity lines and supply businesses, which was not at arms length?
"The presumption must be that if the answer to any of these questions is 'yes', the Commission must not grant an exemption from the EIR Act," Dr Brown said.
The Commission has produced free publications that would be of considerable use to companies to whom the Act applies. These include in particular:
? Practice Note 3: Electricity Industry Reform Act 1998, Commission's Role, Processes and Procedures (also published in the October issue of the Commission's newsletter Compliance);
? Business Acquisitions Guidelines.
These publications and copies of a speech by Dr Brown explaining the Commission' role under the EIR Act are available from the Commission's website, www.comcom.govt.nz, and in hard copy from its Wellington office.
