The Commerce Commission has increased its enforcement activity in the electricity sector after previously warning electricity companies that the settling down period following deregulation was over.
"This year the Commerce Commission has given several energy companies warnings about conduct that could contravene the Commerce Act," Commission Chairman Dr Alan Bollard said in a speech at the Electricity Supply Association annual general meeting in Wellington today.
"As a result, those companies have altered their behaviour."
Dr Bollard also warned that stronger action will be taken if necessary.
"The Commission has now moved to the position where persistently anti-competitive behaviour may have to be taken to court. It is currently investigating the access pricing conduct of one power company, and has received complaints about a second sufficiently serious to warrant investigation."
Its main concern is with the way companies owning a local power network allow, or obstruct, competitors' access to the network. Deregulation allowed power companies to sell electricity to customers anywhere in New Zealand, but to do so they must have access to each others networks. Typically this would be through a use of system contract or a conveyancing contract.
Dr Bollard warned that the Privy Council's decision in the Telecom v Clear case spells out that the owners of a network cannot insist, against the wishes of the customer, on the type of contract because in a normal competitive market they would lose the business to a competitor.
Insistence on a particular form of contract could breach the Act.
With deregulation a system requiring all companies owning electricity networks to publicly disclose economic information about the networks was put in place. The Commission has analysed the first year's data and is now awaiting the second year's information.
"It will be analysing this with some urgency and comparing the results with year one," Dr Bollard said. "It will then identify companies for its further attention."
Deregulation also allowed power companies to merge and to be acquired by others. In rejecting an appeal by Power New Zealand, the High Court has upheld the Commission's approach to competition issues raised by such mergers and acquisitions. However, Power New Zealand has now appealed to the Court of Appeal.
The Telecom v Clear case and the Commission's case against Port Nelson, recently upheld by the Court of Appeal, have helped establish important precedents for all industries involving natural monopolies.
Dr Bollard hoped that these precedents, the continuing flow of information and continued monitoring by the Commission will allow the electricity industry to manage its commercial practices without recourse to long, expensive and potentially destructive court action.
"The Commission sees itself in the front line in terms of applying the regulatory framework," he said. "It takes the view that this is best achieved by insisting on compliance with the requirements of the Commerce Act, through keeping market participants informed and by issuing warnings where appropriate.
"However, it does not shrink from taking relatively heavy handed, and expensive, action through the courts where it considers this to be necessary."
Media contact: Communications Officer Vincent Cholewa
