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Commission authorises self-governance rule-book

Commerce Commission authorises self-governance rulebook for electricity industry

The Commerce Commission today authorised proposed new arrangements in the form of a rulebook for self-governance of the electricity industry. The authorisation is subject to four conditions and will expire four years from the date of the implementation of the rulebook, or on 31 March 2007, whichever is the earlier.

If adopted, the rulebook would supersede existing arrangements for the wholesale market, grid security, metering and reconciliation, and would also incorporate arrangements for agreeing transmission prices, services and investment levels.

The Electricity Governance Board Limited (EGB) initially applied for the authorisation, under section 58 of the Commerce Act, in December 2001, and subsequently submitted a revised application in February 2002.

The proposed rulebook was developed by the industry following the release of the Government Policy Statement (GPS) in December 2000. The GPS sets out the Government’s expectations for industry action and its views on governance matters.

Commission Chair John Belgrave said “The rulebook arrangement contains some innovative and potentially valuable means of meeting the Government’s policy objectives for the electricity sector and for addressing complex problems which have caused concern to the industry for many years.”

“With the conditions and time limit, the Commission is satisfied that the net benefits to the public from the arrangement are such that it should be authorised.” Conditions for authorisation The Commission has applied four conditions to its authorisation. These are: changes to the governance arrangements to ensure that pro-competitive and public benefit enhancing rule changes are not delayed unduly in working groups; changes to the governance arrangements to allow the EGB discretion to over-ride an industry vote opposing a pro-competitive and public benefit enhancing rule change; the completion of the drafting of rules dealing with consumer issues; and a review of the efficacy of the part of the rulebook dealing with transmission services after two years.
The Commission’s written reasons for its decision will be available shortly.

Background The proposed arrangement is a multilateral agreement in the form of a rulebook which incorporates governance provisions and rules for the operation of the wholesale electricity market, the provision of transmission services, provision of common quality elements of electricity, and obligations in respect of metering and reconciling electricity supplied and taken.

The arrangement is proposed to supersede existing arrangements for wholesaling (NZEM) metering and reconciliation (MARIA) and common quality (MACQS) and to provide a forum for making transmission investment decisions.

The Commission received written submissions on the application from all the major parties in the electricity sector, including consumer representatives. It held a conference in June 2002, and subsequently consulted interested parties on possible conditions it was considering, which included a possible limit to the period of authorisation.

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