Progress on regulation of electricity lines

Media Release

Issued 14 August 2001/91

Embargoed 2.30pm

Commerce Commission makes progress on regulation of electricity lines

Speaking to the Electricity Industry Reform Conference in Wellington today, Commission Chair John Belgrave outlined progress made by the Commission on the electricity lines regulations.

The Commission previously announced it was conducting an inquiry into the price of line function services supplied by electricity lines businesses in terms of section 54 of the Commerce Act.

Given the enactment of a new part of the Commerce Act 1986 dealing with electricity line businesses, the Commisson has discontinued its section 54 inquiry as the work is now being continued under the new part of the Act.

As previously announced, the Commission will continue to consult with participants in the electricity transmission and distribution market, consumers and other interested parties in respect of the thresholds, information disclosure and control regimes, which the amendments to the Commerce Act envisage. Further consultation will be carried out by use of a discussion paper in which the Commission will give its preliminary view as to how it intends to fulfil its responsibilities under the new law.

The preparation of the discussion paper is already well advanced. Given the recent passing of the enabling legislation, final drafting is now possible. The Commission intends to obtain formal legal and economic quality reports before the paper is released for written submissions by consumers and market participants. The Commission plans to release the discussion paper in October/November and will likely hold public hearings in early 2002, to allow the Commission to receive oral submissions and question participants before proceeding to set thresholds for control.

Disclosed asset values of electricity lines businesses are required to be checked by the Commission. This is called asset recalibration. The Commission intends appointing consultants to assist it to fulfil its asset recalibration responsibilities.

The first task of the consultants will be to advise the Commission in respect of a practice note. This will outline the processes and form of the comprehensive audit of the asset values of Transpower and electricity lines business and the circumstances under which their valuation reports will be approved by the Commission.

The Commission must conduct a review of the valuation methodoligies of the ODV's currently being used by Transpower and electricity line businesses. Consumers and others have argued this is not an appropriate method and/or there have been inaccuracies on its application. The Commission, according to the amended Act, must review alternatives.

The Commission's view is that the asset recalibration process, with its 31 March 2002 deadline for completion, and the implementation of the thresholds and control regime are its present priorities. Once the recalibration process is underway and the proposed discussion paper is released, the Commission will move to fulfil its responsibility to carry out a review of valuation methodologies.

A copy of John Belgrave's powerpoint presentation, which summaries the above release, is available via email. Please email jackie.maitland@comcom.govt.nz

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