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Commission publishes expanded Transpower reasons

Issued 17 February 2006/100

Commission publishes expanded Transpower reasons

The Commerce Commission has published an expanded version of its reasons for its intention to declare control of the electricity transmission services supplied by Transpower New Zealand Limited.

The Commission has consulted with Transpower about the status of information in the original paper that was being treated as confidential. The Commission has reached a decision that only certain parts of that material are confidential and, as such, has today released an updated version of the document containing those parts that are in the public interest and are not commercially sensitive.

In reaching its decision to publish certain material the Commission has balanced the public interest with the commercial prejudice that might be placed upon Transpower and has then decided on exactly what to publish.

The Commission’s reasons for its intention to declare control of Transpower can be viewed on the Commission’s website www.comcom.govt.nz.

Background

Part 4A of the Commerce Act came into effect on 8 August 2001 and, among other things, requires the Commission to implement a targeted control regime for the regulation of 28 electricity distribution businesses and the state-owned transmission company, Transpower.

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 by ensuring that suppliers–
(a) are limited in their ability to extract excessive profits; and
(b) face strong incentives to improve efficiency and provide services at a quality that reflects consumer demands; and
(c) share the benefits of efficiency gains with consumers, including through lower prices.

The targeted control regime comprises a number of distinct elements: setting thresholds; assessment and identification; post-breach inquiries (and administrative settlements); and control.

Since the regime was implemented the Commission has twice published its intention to declare control, of Unison Networks’ electricity distribution services in September 2005 and of Transpower’s transmission services in December 2005. The Commission originally published its reasons for its intention to declare control of Transpower’s transmission services in January 2006.

If the Commission makes a declaration of control it can relate to all or some of the services provided by the controlled business. The Commission can then set rules—termed an "authorisation"—governing the prices and revenue of those controlled services for up to five years.

While the business may face penalties if it does not comply with those rules, it can otherwise continue to operate normally.

Furthermore, control is not intended to compensate consumers for any past overcharging that may have taken place. Rather, it is intended to put in place constraints on the controlled business’s future performance.

ENDS

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