Commission waits Unison price increase explanation

Commission awaits explanation from Unison on price increases

The Commerce Commission is awaiting an explanation from Hastings based electricity lines business Unison on its pricing structure.

Commission Chair Paula Rebstock said that Unison's self assessment against the price path threshold, set by the Commission last year, indicated that Unison had breached that threshold due to price increases. In December 2003, the Commission asked Unison to provide more detailed information relating to its self assessment for the 2001-2003 period by 30 January 2004, and in addition, to provide information on any future price changes it might be proposing.

Unison announced this week further price increases that will affect electricity consumers in the Hawke's Bay, Taupo and Rotorua regions.

Ms Rebstock said the Commission takes breaches of the thresholds seriously, and is prepared to investigate when necessary.

"The thresholds assessment is a trigger for the Commission to use when determining whether a formal investigation is required," explained Ms Rebstock.

"The Commission will consider all of the options available under Part 4A of the Commerce Act, including control of an electricity lines business, if price increases cannot be justified," she added.

"An investigation could also result in a settlement with the lines business that may involve setting a new pricing regime if the Commission was satisfied that some or all of the proposed price increases were justified." Ms Rebstock said the purpose of the targeted control regime is to promote the efficient operation of markets directly related to electricity distribution and transmission services through targeted control for the long-term benefit of consumers.

"The regime is designed to ensure that suppliers are limited in their ability to extract excessive profits, face strong incentives to improve efficiency and provide services at a quality that reflects consumer demands, and share the benefits of efficiency gains with consumers, including through lower prices," said Ms Rebstock.

Background Part 4A of the Commerce Act 1986, which commenced on 8 August 2001, establishes the regulatory regime for large electricity lines businesses (distribution businesses and Transpower). The Commission is required, inter alia, to set thresholds and assess the performance of electricity lines businesses against those thresholds. If one or more of the thresholds are breached by an electricity lines business, the Commission could further examine the business through a post-breach inquiry and, if required, control their prices, revenue or quality. In effect, the thresholds are a screening mechanism to identify electricity lines businesses whose performance may require further examination and, if required, control by the Commission.

If the Commission identifies a breach, it can be satisfied that the nature of the breach requires no further action by the Commission, or it can open a formal post-breach inquiry. An inquiry could result in a settlement between the Commission and the lines business that may involve a new pricing regime, or it may be the Commission forms an intention to make a declaration of control with respect to prices, revenue and quality of that particular business.

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