The Commerce Commission's preliminary view is that it would authorise the proposed agreement and arrangements among users of the national electricity grid relating to the security of the grid.

The Commission today published its draft determination giving its preliminary view of the application for authorisation and listing the areas in which it seeks further information from interested parties.

Commissioner Dr Kate Brown said that based on the information currently available to it, the Commission's view is that public benefits from the proposal outweigh its detriments to competition.

The Commerce Act prohibits anti-competitive behaviour but allows parties involved to apply for authorisation of a specified practice. The Commission will authorise a practice if it is satisfied that its benefits outweigh its detriments.

In this case, Transpower New Zealand Limited applied for authorisation of the proposal.

Dr Brown said that the Commission's preliminary view is that the proposal is a form of price fixing because it involves competitors agreeing on how the costs of maintaining the quality of electricity supply from the national grid are allocated to each other. It may also have the potential to exclude some competitors if they are not willing to pay the costs for particular services.

Both price fixing and agreements among competitors that may exclude a rival from a market are prohibited by the Act. However, the Commission's initial economic assessment of these practices is that, in this case, they result in little or no lessening of competition in any electricity market.

Dr Brown said that the Commission accepts that the principal benefit arises from better decision making by a group made up of users and Transpower than would be likely by Transpower acting alone. The users carry most of the costs of inappropriate decisions.

However, the Commission is concerned that it has been unable at this stage to quantify the benefits. This is one of the areas in which it is seeking further information from interested parties.

It is important to note that Transpower has sought authorisation of the decision making process that it and users propose using. It has not sought authorisation of individual decisions made through the process nor of specific contracts that may result from those decisions.

If a practice is authorised, then it is protected from court action under the Commerce Act. In this case, if the process is authorised, the decisions and contracts that come from it would not have the protection of an authorisation and would still be covered by the Act.

Public copies of the Commission's draft determination 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