The Commerce Commission today authorised proposed arrangements that will provide a process for determining common elements of quality for electricity transmission.
Commissioner Dr Kate Brown said that the Commission found that the arrangements included price fixing, but that the Commission considered that the proposal would create net public benefits and should be authorised.
The Commerce Act prohibits anti-competitive business practices, including price fixing. However, parties can apply for authorisation of an otherwise prohibited business practice. The Commission will grant an authorisation if it is satisfied that public benefits from the practice outweigh its detriments to competition.
The arrangements authorised today involve buyers and sellers of electricity. They allow those parties to determine common quality elements of electricity transmitted. Among other things, the parties will decide how to allocate the costs of maintaining the common quality levels. Currently, Transpower makes these decisions.
Dr Brown said that the Commission's view, in this case, is that the arrangements, including the price fixing component, would cause no lessening of competition and so produce no detriments. Public benefits are expected to arise from lower transaction costs and improved security of electricity supply.
The Commission considered that similar arrangements would be likely to evolve if it did not authorise this proposal, but that they would take longer to put in place and therefore would bring less public benefit.
Background
The proposed arrangements would shift responsibility for determining desired quality levels for electricity traded across the grid from Transpower to the entities involved in buying and selling electricity. Quality of electricity supply covers matters such as voltage and system frequency.
Establishing targets or performance standards for quality of electricity supply enables generators and end-users to design equipment connected to the electricity network to cater for the level and fluctuations in voltage and frequency.
Where aspects of quality are common to all grid users, the arrangements will provide a mechanism for the desired levels of quality to be agreed collectively. This mechanism will also be used to agree any equipment standards necessary to maintain common elements of quality, and to determine the methodologies for allocating costs associated with maintaining those common elements.
Copies of the Commission's decision will be available from its website, www.comcom.govt.nz, and are available from reception at its Wellington office, level 7, Landcorp House, 101 Lambton Quay.
Media contact: Commerce Act Manager Geoff Thorn
Phone work (04) 498 0958
Communications Officer Vincent Cholewa
Phone work (04) 498 0920
Commission media releases can be viewed on its web site www.comcom.govt.nz
