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Warning to Buller Electricity and Eastland Network

Issued 24 May 2002/057

Commerce Commission issues warning to Buller Electricity and Eastland Network for breach of the Commerce Act

The Commerce Commission has now approved the remaining asset valuations of two electricity lines businesses – Westport-based Buller Electricity Limited and Gisborne-based Eastland Network Limited – and at the same time warned both companies that the Commission takes breaches of the Commerce Act very seriously.

Commission Chair John Belgrave explained that all 29 lines companies plus Transpower were required under the Commerce Act to publicly disclose, by 31 March 2002, an ODV valuation report approved by the Commission. Buller and Eastland did not meet this requirement within the statutory timeframe.

“The Commission has issued warnings to both companies against any future breaches of the Act,” said Mr Belgrave.

“It is important that companies take their statutory obligations seriously and fulfil those obligations to the required standard. The efficacy of any regulatory regime depends on the integrity of information and conduct of parties, which is why assessing potential breaches and taking appropriate action is such an important part of the Commission’s work.”

Mr Belgrave acknowledged the cooperative approach by both companies in taking on board the Commission’s reasons for non-approval of their reports in late March 2002 and preparing revised reports that now comply with the ODV Handbook.

ODV is an acronym for Optimised Deprival Valuation, which is the valuation methodology electricity lines companies are required to use in valuing their system fixed assets. The rules pertaining to ODVs of electricity lines business system fixed assets are incorporated in the current edition of the ODV Handbook, issued by the Ministry of Economic Development.

Under Part 4A of the Commerce Act, the Commission was required to carry out a comprehensive audit of the valuation of the line business system fixed assets of large electricity line owners. The aim of the comprehensive audits was to ensure valuations reflected a rigorous and accurate application of the ODV method, as set out in the fourth edition of the ODV Handbook.

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