Commission authorises Powerco to acquire Egmont Electricity
Published21 Jul 1997
The Commerce Commission today authorised Powerco's proposed acquisition of Egmont Electricity.
The Commerce Act prohibits business acquisitions that result in dominance being acquired or strengthened. However, the Act allows an otherwise prohibited acquisition to be authorised if the Commission is satisfied that the public benefits from the acquisition outweigh its detriments.
Commission Chairman Dr Alan Bollard said that the Commission was satisfied that the public benefits from the proposal would outweigh its detriments to competition.
The Commission's investigation of the proposal showed that there is some competition between natural gas supplied by Powerco and electricity supplied by Egmont in Hawera, Normanby and Manaia. This competition would be lost as a result of the acquisition. As a consequence, there would be some strengthening of existing dominance in the markets for delivered natural gas and delivered electricity to small consumers in the area.
Dr Bollard said that the main public benefit of the acquisition was that it would allow a rationalisation of the corporate and operational activities of Powerco and Egmont Electricity.
"The Commission also considered that the acquisition would allow increased efficiency from reduced investment in the non-electrical assets necessary for running a power company, reduced electrical losses, greater reliability of supply over the two electrical networks, lower electricity purchasing costs and the ability of generation from the Patea hydro scheme to be used locally," he said.
"The Commission considered that it is possible that Powerco would be able to impose a small price increase in the towns affected as a result of the acquisition and that this would cause some detriments in the local economy.
"However, these detriments were small, and the Commission is satisfied that they would be outweighed by the public benefits, and has therefore authorised the acquisition."
Powerco is a large electricity and natural gas company. It supplies electricity to consumers over a region from New Plymouth to Marton and natural gas to consumers in North and South Taranaki.
Egmont Electricity is a small electricity company which supplies electricity to consumers in South Taranaki. Its electrical network is completely surrounded by that of Powerco.
Copies of the Commission's decision are available from reception at its Wellington office,
level 7, Landcorp House, 101 Lambton Quay.
Media contact: Jo Bransgrove, Manager, Commerce Act Division
