Commission declines to exempt Top Energy from Electricity Industry Reform Act
Published10 Jun 1999
The Commerce Commission today declined to exempt Top Energy from the Electricity Industry Reform Act. Top Energy applied to the Commission for exemption so as to be able to continue ownership and operation of the Ngawha Power Station, located near Kaikohe. Such ownership and operation of Ngawha would mean that Top Energy had a cross-involvement with an electricity lines and an electricity supply business. That is prohibited by the Electricity Industry Reform Act.
Commission Member Dr Kate Brown said that the Commission declined the exemption on the grounds that an exemption would:
? provide Top Energy with incentives or opportunities to cross-subsidise Ngawha Power Station from its electricity lines business; and
? allow a relationship between Top Energy's electricity lines and supply businesses which would not be at arms length.
The Commission considered that permitting Top Energy to retain involvements in both electricity line and supply businesses would defeat the purposes of the Electricity Industry Reform Act.
Top Energy has stated that in the event of the Commission declining to grant it an exemption it will place its shares in Ngawha Power Station in a mirror trust. A mirror trust is a new trust separate from, but with the same terms as, the Bay of Islands Power Trust which currently owns Top Energy. It will have different trustees. The Electricity Industry Reform Act allows trust owned electricity companies until 1 April 1999 to form a mirror trust if they wish. Commission Decision 349 granted Top Energy a time extension to form a mirror trust within 90 days from this latest Decision.
The Commission is currently considering applications for exemption from Infratil and Alliant in respect of their shareholdings in Powerco, CentralPower and TrustPower.
Dr Brown could not say when the Commission expects to make those two decisions.
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?
Copies of:
? Decision Number 353, Top Energy;
? 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); and
? Business Acquisitions Guidelines
Are available from reception at the Commission's Wellington office, Level 7, Landcorp House, 101 Lambton Quay.
