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Greater certainty for regulated businesses

Greater certainty for regulated businesses

The Commerce Commission has launched a significant new project to create a series of regulatory guidelines and principles that will apply to the regulated businesses in the electricity and gas sectors.

A process paper released by the Commission today explains how it will set the new regulatory guidelines and how interested parties can be involved in the process. The regulatory guidelines will be similar to the Mergers and Acquisitions Guidelines released in late 2003.

Commerce Commission Chair Paula Rebstock said, "The Commission is taking a lead to provide enhanced transparency and certainty within the regulatory regimes administered under the Commerce Act. This project will build on the Commission's previous decisions, ensure that the Commission's regulatory decisions are consistent with international best practice, and that they are transparent."

The guidelines will assist the Commission to promote outcomes comparable to competitive markets in regulated industries where competition does not exist. These include incentives to invest, incentives to achieve efficiency gains which are shared with consumers (including through lower prices) and limiting excessive returns over time.

The Regulatory Principles and Guidelines Project involves three stages, each with a consultation process, as follows:

First Stage: Develop overall high-level principles that will underpin subsequent guidelines and methodologies, involving input from international and New Zealand experts.

Second Stage: Develop detailed guidelines, with input from expert advisers, for the following subject areas:
• Cost of capital;
• Valuation of assets;
• Allocation of common costs;
• Taxation;
• Regulatory specifications; and
• Pricing.

Third Stage: Apply guidelines to develop industry specific methodologies.

The industry specific methodologies will apply first to electricity lines businesses and gas distribution businesses.

"The Commission is seeking engagement and feedback at each of these stages. The aim is to develop guidelines to provide a certain and transparent process for all interested parties," said Ms Rebstock.

Submissions on the process paper can be made by 16 June 2008. The process paper can be found on the Commission website under Industry Regulation - Regulatory Principles and Guidelines Project - Consultation - Papers


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