The Commerce Commission has today granted its second exemption under the Electricity Industry Reform Act 1998 (EIR Act).
Commissioner Dr Kate Brown said that Carter Holt Harvey Ltd's (CHH) application for exemption from section 17 of the EIR Act has been granted, subject to certain terms and conditions.
Carter Holt Harvey Ltd owns and operates a pulp and paper production plant at Kinleith and a corrugated paper packaging plant at Penrose. CHH is a major purchaser of electricity, supplying both itself and other, non-CHH, businesses. At both the mills, it distributes electricity over its own lines. Common ownership of an electricity supply business and an electricity lines business is prohibited under the EIR Act.
Dr Brown said, "in making its decision the Commission noted that the actual amount of electricity sold by CHH over lines it owned was small and would easily have come within the EIR Act's exclusions, but for the fact that CHH conveyed very large amounts of electricity it used itself over the same lines. The Commission was therefore satisfied that CHH's incentives and opportunities to inhibit competition were no more than minimal."
The exemption does not take affect until published by way of notice in the Gazette. This will occur as soon as possible.
Background
The Commission, pursuant to section 81, exempts Carter Holt Harvey Limited from the application of section 17 of the Electricity Industry Reform Act 1998 in relation to a prohibited cross-involvement in an electricity lines business, being the installed electricity distribution networks at the Penrose and Kinleith mills, and an electricity supply business.
The exemption is subject to the following terms and conditions:
That if Carter Holt Harvey Limited commences supplying electricity to other than the following electricity consumers or their assigns it notifies the Commission:
Alkeiman Industries Ltd;
C Pepper Ltd;
D Ryan Ltd;
Kinleith Tractor Shop Ltd;
Mike Lambert Ltd:
Fernz Chemicals (NZ) Ltd;
Pedersen Holdings Ltd;
Air Liquide (NZ) Ltd and
Paper Reclaim Ltd
That if Carter Holt Harvey Limited provides electricity line services to other than the following electricity consumers of their assigns it notifies the Commission:
Kinleith Tractor Shop Ltd;
Mike Lambert Ltd; and
Paper Reclaim Ltd.
That Carter Holt Harvey Limited remains a net importer of electricity from Transpower Ltd's national grid.
That Carter Holt Harvey Limited advises the Commission of any increases in the electricity price it charges the above consumers.
Where any change of the type referred to in (a) to (d) occurs, the Commission may vary or revoke this exemption in accordance with section 81(5) of the EIR Act.
The EIR Act was passed last year and gives companies involved in electricity markets until April 1 this year to put in place corporate separation of their electricity generation and trading businesses from their lines businesses or to have obtained an exemption from the Commission.
Carter Holt Harvey Ltd (CHH) is a large, multinational, company involved in forestry ownership, wood products, pulp and paper, tissues and packaging. The United States based International Paper Inc holds a controlling interest with the remaining shares widely dispersed amongst companies holding shares as nominees on behalf of other parties, together with small private shareholders. Its operating revenue in 1998 was over $3 billion.
CHH's Mill at Penrose in South Auckland manufactures corrugated paper packaging. CHH's Mill at Kinleith, near Tokoroa, is a pulp and paper production plant. Both Mills have extensive electricity distribution networks (networks) which provide electricity supply to the many electrically operated machines which comprise the two facilities.
Public copies of the CHH decision are available from reception at the Commission's Wellington office, level 7 Landcorp House, 101 Lambton Quay.
Media contact:
Commissioner Dr Kate Brown
Phone (03) 482-1558
Communications Officer Vincent Cholewa
Phone work (04) 498 0920
Commission media releases can be viewed on its web site www.comcom.govt.nz
