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Commission commences inquiry into gas pipelines

Media Release

Issued 13 May 2002-03/157

Commission commences inquiry into gas pipelines

The Commerce Commission announced today it has commenced work on an inquiry into the supply of gas pipeline (transmission and distribution) services.

The inquiry has been requested by the Minister of Energy pursuant to Part IV of the Commerce Act. Under that Part, the Commission is required to make recommendations to the Minister on whether or not supply of the relevant goods or services should be controlled.

The Commission will soon release information on the process it will follow for the inquiry, which will include opportunity for interested parties to make their views known to the Commission.

The Minister has requested the Commission to complete the inquiry by 1 November 2004.

The Terms of Reference for the inquiry is available on the Ministry of Economic Development’s website, www.med.govt.nz.

This is the Commission’s second control inquiry. The Minister of Commerce requested that the Commission report on whether the supply of airfield activities at Auckland, Wellington and Christchurch International Airports should be controlled. The Commission’s completed that inquiry and reported to the Minister in August 2002.


Statutory framework

The Commerce Act 1986 envisages the possibility that control may be introduced over goods and services as part of the statutory framework to promote competition in markets within New Zealand. The relevant provisions are found in Part IV of the Act.

The process for the introduction of control requires the Governor-General to declare, by an Order in Council, that specified goods and services shall be controlled. The Governor-General may only do so on the recommendation of the Minister of Commerce.

The Minister of Commerce may only make a recommendation for control if satisfied the goods or services are supplied or acquired in a market in which competition is limited or likely to be lessened, and it is necessary or desirable that goods or services be controlled in the interests of acquirers or suppliers.

For the purpose of the gas pipelines inquiry, the Minister of Energy can, pursuant to s13 of the Ministry of Energy (Abolition) Act 1989, exercise and perform the powers and duties conferred on the Minister of Commerce under sections 53, 54 and 56 of the Commerce Act with respect to specified classes of goods and services.

The Act allows the Minister of Commerce (the Minister of Energy in this case) to request the Commission to report on whether control should be recommended to the Governor-General. The Minister of Energy has, by letter dated 30 April 2003, requested the Commission to do this by
1 November 2004.

In making its recommendations to the Minister of Energy, the Commission will need to address, as required by the relevant provisions of the Act, whether:
- competition in the supply of gas pipeline services is limited or likely to be lessened;
- control is necessary or desirable in the interests of acquirers of gas pipeline services; and
- market conditions are such that the Minister should recommend to the Governor-General that control be declared.

Terms of reference for the gas pipelines inquiry

The Minister has asked the Commission in reaching its view on whether control should be introduced for specific advice on:
- whether gas pipeline services may be controlled in terms of section 52 of the Act;
- the methodology that the Commission considers appropriate for valuation of pipeline assets for the purposes of its advice on the matters covered in the Minister’s letter;
- the net benefits to the public of control; and any other matter that the Commission may think relevant to a decision on whether control should be introduced.

Should the Commission recommend pipeline services be controlled, the Minister has also requested specific advice on the technical provisions relating to declaration of control as set out in section 57A of the Act.

The goods or services specified by the Minister are those connected with either gas transmission or gas distribution or both (“gas services”). For the avoidance of doubt, the Minister has noted in the terms of reference that “bypass” pipelines and pipelines owned by Maui Development Limited are to be included in the inquiry.

Other points to note

The relevant statutory provisions were applied by the Commission in the context of the airports inquiry. The Commission made its recommendations to the Minister of Commerce on 1 August 2002. A public version of the Commission’s final report is available at http://www.med.govt.nz/buslt/bus_pol/airports/index.html

For the avoidance of doubt, the Commission’s role in relation to gas pipelines (the inquiry) is different to that related to electricity lines businesses:
- in the case of gas pipelines (Part IV of the Act), the Governor-General, on the advice of the Minister of Energy, would, if required, be responsible for declaring control. The Commission’s role is to make recommendations to the Minister of Energy on whether or not control is necessary or desirable; and
- in the case of electricity lines businesses (Part 4A), the Commission can itself, if required and subject to the relevant statutory provisions, declare control of electricity lines businesses.


Commission media releases can be viewed on its web site www.comcom.govt.nz

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