The Commerce Commission today exempted Fletcher Challenge Ltd (FCL) and its related company, Fletcher Challenge Steel Ltd, from the application of the cross-ownership rules of the Electricity Industry Reform Act.

Fletcher Challenge had applied to the Commission for exemption to allow its related companies to continue to own and operate electricity distribution networks and electricity generators, and to supply other companies with electricity. Such activities are associated with FCL's manufacturing and property owning businesses.

Commission investigations showed that continued ownership would mean that FCL and Fletcher Challenge Steel had cross-involvements with electricity lines and electricity supply businesses that are prohibited by the Electricity Industry Reform Act.

Commissioner Dr Kate Brown said that the Commission granted the exemption on the grounds that an exemption would not in any way that was more than minimal:

  • provide FCL with incentives or opportunities to inhibit competition in the electricity industry;
  • provide the company with incentives or opportunities to cross-subsidise its electricity generators from its electricity lines businesses; and
  • allow a relationship between FCL's electricity lines businesses and its electricity supply businesses that would not be at arms length.

The Commission considered that permitting FCL and Fletcher Challenge Steel to retain involvements in both electricity line and supply businesses would not defeat the purposes of the Electricity Industry Reform Act.

FCL did not charge to distribute electricity, added no margin to its own purchase costs in respect of the electricity it supplied to other companies and had no rational method of cross-subsidising its generation activities from its lines businesses.

Copies of:

  • Decision Number 366, Fletcher Challenge Ltd and its Related Companies;
    • and
  • 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).

are available from reception at the Commission's Wellington office, Level 7, Landcorp House, 101 Lambton Quay and from the Commission website.

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