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Commission grants EIRA exemption

Commission grants EIRA exemption

The Commerce Commission has exempted Mr Samford Lee Maier (Junior) from the application of the cross involvement rules of the Electricity Industry Reform Act 1998 (EIR Act).

Mr Maier had applied to the Commission for an exemption to allow him to continue as a director of Mighty River Power (an electricity supply business) and New Plymouth Equity Advisors Limited, an advisory company to the New Plymouth District Council, which is the principal shareholder of Powerco (an electricity lines business).

Potentially, any such ‘involvement’ in both a lines company and a supply business would contravene section 17 of the EIR Act. Deputy Chair Paula Rebstock said that the Commission granted the exemption on the grounds that an exemption would not in any way, that was more that minimal: provide Mr Maier with incentives or opportunities to inhibit competition in the electricity industry; provide Mr Maier with incentives or opportunities to cross subsidise Mighty River Power’s electricity generators from the electricity lines businesses of Powerco; and allow a relationship between Powerco’s electricity lines businesses and Mighty River Power’s electricity supply businesses which would not be at arms length.

The exemption was made subject to the following terms and conditions: Mr Maier shall exclude himself, on the basis of a legal conflict of interest, from any discussion about, or consideration of, advice by New Plymouth Equity Advisers Limited (NPEAL) concerning any relationship or transactions which Powerco has or proposes to have with any electricity retailer or generator; and after one year from the date of this exemption, NPEAL shall provide the Commerce Commission with copies of all advice it has provided that relates to Powerco.

The Commission considered that permitting Mr Maier to retain involvements in an electricity supply business and an advisory body to the principal shareholder of Powerco would not defeat the purposes of the EIR Act.

In making its decision the Commission notes that the facts revealed in Mr Maier’s application are particular to his situation alone. Those facts are essentially the absence of any involvement by NPEAL in Powerco’s operational matters.

Background The purpose of the EIR Act is to reform the electricity industry to better ensure that costs and prices in the electricity industry are subject to sustained downward pressure and the benefits of efficient electricity pricing flow through to all classes of consumers, by effectively separating electricity distribution from generation and retail and promoting effective competition in electricity generation and retail markets.

The Commission may grant an exemption in respect of a business or involvement or interest, only where doing so: would not result in certain involvements in electricity lines businesses and electricity supply businesses which may create incentives or opportunities: to inhibit competition in the electricity industry; or to cross-subsidise generation activities from electricity lines businesses; and would not result in relationships between electricity lines businesses and electricity supply businesses which are not at arms length.

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