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Commission Grants Exemption

Commission Grants Exemption

The Commerce Commission has granted Lloyd Morrison an exemption under the Electricity Industry Reform Act 1998 (the EIR Act) in relation to his potential appointment to the board of Auckland International Airport Limited (AIAL), an electricity lines business.

If Mr Morrison became a Director of AIAL, an electricity lines business, it would result in a cross involvement, as Mr Morrison is already a Director of Wellington International Airport Limited (WIAL) and TrustPower Limited, both electricity supply businesses.

Lloyd Morrison had applied for exemption from section 17 of the EIR Act, which prohibits cross-involvement in electricity lines and supply businesses.

The Commerce Commission exempts Lloyd Morrison from compliance with section 17 of the EIR Act in respect of the cross-involvements with WIAL and TrustPower that would be created through his appointment to the position of director of AIAL.

The exemption is subject to the following conditions:

1. whilst Lloyd Morrison is cross-involved with TrustPower and AIAL, Lloyd Morrison shall not participate in any discussions or decision making by TrustPower and/or AIAL regarding matters that relate to or could affect or favour the supply of electricity by TrustPower (or disadvantage any other electricity supply business other than TrustPower) on AIAL's electricity distribution network or the provision of electricity lines services by AIAL to TrustPower, including:

a. the selection of, and any negotiation with, any electricity retailer for the supply, or intended supply, of electricity to AIAL; and

b. the supply, or intended supply, of electricity by TrustPower to any new, or existing, consumers on AIAL's electricity distribution network;

and shall not disclose the outcomes of any discussions or decision making by AIAL to TrustPower (and vice versa) on those matters; and

2. the exemption is specific to the cross-involvements created through Lloyd Morrison's involvement in AIAL. It does not extend to any other interest or existing or future cross-involvement of Lloyd Morrison.

Commission Chair Paula Rebstock said that, provided the above conditions are met, the Commission had determined that the granting of the exemption would not create incentives or opportunities to inhibit competition in the electricity industry.

A public version of the Commission's decision will be made available on the Commission's website www.comcom.govt.nz under Public Registers/Electricity Industry Reform Act Exemptions.

Background

AIAL is an electricity lines business because it owns and operates the electricity distribution network at Auckland International Airport, and conveys electricity across that network to connected consumers.

WIAL is an electricity supply business because it sells electricity to consumers connected to the electricity distribution network at Wellington International Airport, and owns and operates core assets of an electricity retail business.

The electricity industry has four main parts: electricity generation, electricity transmission, electricity distribution (lines businesses), and electricity retail. Only generation, distribution (lines), and retail are covered by the EIR Act.

Under the EIR Act, a company may have an ownership interest in both generation and retail businesses, but generally needs permission to own both lines and generation, or lines and retail. It seeks that permission by applying for an exemption under the EIR Act.

The purpose of the EIR Act is to reform the electricity industry to better ensure that costs and prices in the electricity industry are subject to sustained downward pressure and the benefits of efficient electricity pricing flow through to all classes of consumers, by effectively separating electricity distribution from generation and retail and promoting effective competition in electricity generation and retail markets.

The Commission may grant an exemption in respect of a business or involvement or interest, only where doing so:

a) would not result in certain involvements in electricity lines businesses and electricity supply businesses which may create incentives or opportunities:

I. to inhibit competition in the electricity industry; or

II. to cross-subsidise generation activities from electricity lines businesses; and

b) would not result in relationships between electricity lines businesses and electricity supply businesses which are not at arms length.

ends


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