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Comments on process for gas pipelines inquiry


Commission seeks comments on process for gas pipelines inquiry

The Commerce Commission is inviting submissions on the process it proposes to follow for the inquiry into gas pipeline (transmission and distribution) services, following the request by the Minister of Energy to report, by 1 November 2004, on whether the supply of gas pipeline services should be controlled.

The proposed process is as follows:
Indicative date
Proposed process released by Commission 30 May 2003
Written submissions on proposed process due 16 June 2003
Process confirmed by Commission Gazette notice published pursuant to s57(2) of the Commerce Act 30 June 2003
Framework Paper released by Commission 11 July 2003
Written submissions on Framework Paper due 8 August 2003
Conference on Framework Paper 1-5 September 2003
Draft Report released by Commission March 2004
Written submission on Draft Report due April / May 2004
Conference on Draft report May / June 2004
Final Report provided to Minister of Energy By 1 November 2004
The Commission will shortly commence investigations related to the inquiry, including meeting with interested parties. These investigations will be ongoing throughout the course of the inquiry.

The Commission intends to make use, as required, of its information gathering powers in the Commerce Act (sections 70E and 98) to assist it in obtaining information relevant to the inquiry, including for the purpose of allowing the Commission to conduct its analysis.

Comments on proposed process Comments are invited on the proposed process by 16 June 2003. The Commission intends to publish the process it has decided to adopt by 30 June 2003.

In making comments on the Commission’s proposed process, submitters should focus on process matters. The Commission does not yet want submissions on, for example, whether controls should be imposed.

Comment The proposed process draws on that used by the Commission for the airports inquiry (completed in August 2002) and the Commission’s general procedure for determining authorisation applications under the Commerce Act.

A key change, compared to the process for the airports inquiry, is the release of a Framework Paper in the early stages of the inquiry, along with the request for submissions and a conference on that paper. The Commission considers that including this step in the process will give a better separation between the formulation of the framework and methodologies for the inquiry on one hand, and the application of the framework and methodologies on the other. The Framework Paper is expected to include the Commission’s: approach to the inquiry, including a definition of the goods and services subject to the inquiry; analysis of the legal framework for the inquiry (Part IV of the Commerce Act 1986); proposed approach to examining the level of competition for gas pipeline services, including the relevant markets for the inquiry and the issues that will be investigated within the defined markets; and proposed economic framework for the inquiry, including relevant economic efficiency considerations (e.g. principles for pricing, asset valuation & WACC) and the Commission's proposed approach to the analysis for determining whether control is necessary or desirable.

Provision of information by the Commission The Commission will maintain a publicly accessible document list. In the interests of transparency, the Commission’s intention is that as much information as possible is made publicly available during the inquiry on an ongoing basis. To this effect, the Commission will proactively release material sent and received. Any confidential information will not be made publicly available if the Commission accepts there is good reason to maintain confidentiality.

To the fullest extent possible, the Commission will release information electronically. To assist with the electronic distribution of documents, the Commission requests that parties interested in receiving information related to the inquiry provide contact details (including email addresses) to the Commission by emailing gaspipelinesinquiry@comcom.govt.nz. For any parties that do not have email, the Commission can make some paper copy information available.

The Commission will also put key documents on its website, www.comcom.govt.nz, including all submissions from interested parties.

Hard copies of information can be sent to the Commission at:

Gas Pipelines Inquiry Commerce Commission Level 6, 44-52 The Terrace PO Box 2351 Wellington, NZ

The Terms of Reference for the inquiry is available on the Commission’s website, www.comcom.govt.nz.

Background 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 the prices of 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; and control is necessary or desirable in the interests of acquirers or suppliers of gas pipeline services.

Terms of reference The Terms of Reference for the inquiry is available on the Commission’s website, www.comcom.govt.nz.

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 recommendation 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.

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