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Gas Pipelines Inquiry Framework Paper Released


Gas Pipelines Inquiry: Commerce Commission releases draft framework paper

The Commerce Commission today released a draft framework paper which proposes legal and analytical frameworks to be used in the Gas Pipelines Inquiry.

The Commission commenced the inquiry as a result of a request from the Minister of Energy pursuant to Part IV of the Commerce Act.

The paper also includes details on the Commission’s process for the Inquiry, which has been updated following submissions received.

The Inquiry consists of a two stage consultative process, with stage one focusing on defining the Commission’s framework for the Inquiry.

Stage two of the process focuses on the application of the framework and interpretation of the associated findings. The Commission invites interested parties and industry participants to make written submissions on the draft framework paper by 15 August 2003.

A description of the submission process and requirements is included in the paper. The paper is available on the Commission’s website, www.comcom.govt.nz, select Regulatory Control Study on Gas Pipelines, Commission Reports and Documents. Gazette Notice Pursuant to s57(2) of the Commerce Act the Commission will publish the process for the Inquiry in the New Zealand Gazette next week.

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 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.

The terms of reference require the Commission to report under section 56 as to whether an Order in Council under section 53 of the Commerce Act should be made in relation to the goods and services supplied by persons in markets directly related to either a natural gas transmission system or a natural gas distribution or both (gas services).

The Minister has asked the Commission in reaching its view on whether control should be introduced for specific advice on: whether gas 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 gas 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.

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 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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