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Com Com welcomes Supreme Court ruling on input methodologies

Commission welcomes Supreme Court ruling on input methodologies

The Commerce Commission welcomes a Supreme Court decision today confirming that the Commission is not required to determine a starting price input methodology for electricity distribution and gas pipeline services. This confirms the decision by the Court of Appeal in June 2012.

"Today’s ruling finally allows the Commission to complete aspects of the regulatory regime which will promote the certainty that the legislation anticipated,” said Commerce Commission Chair Dr Mark Berry.

As a consequence of the Supreme Court’s decision the Commission can now complete the reset of the default price-quality paths for both electricity distribution and gas pipeline businesses. The final report on the reset of electricity default price-quality paths is scheduled for 30 November, 2012, and the Commission’s final decision on the default price-quality path for gas pipeline businesses is scheduled for release in February 2013.

"The judicial reviews the Commission has faced in relation to input methodologies have significantly delayed the implementation of the Part 4 regime. This has had the effect of allowing some businesses to continue to charge their customers too much. And some businesses which we believe should be able to charge more in order to invest in their networks have not been able to increase prices," Dr Berry said.

“We look forward to being able to now implement the regime as Parliament intended.”

You can see a copy of the Supreme Court judgment at http://www.comcom.govt.nz/input-methodologies-2/

Background
Input methodologies involve setting upfront regulatory rules, processes and requirements that apply to the regulatory instruments under Part 4 of the Commerce Act. Input methodologies were determined by the Commission in December 2010 and can be viewed on the Commission's website at http://www.comcom.govt.nz/input-methodologies-2/

Part 4 of the Commerce Act regulates suppliers of electricity lines services, gas pipeline services and specified airport services supplied by Auckland, Wellington and Christchurch airports.

Default Price-quality Path (DPP) limits the amount a business can charge for regulated services by setting a maximum price cap or revenue cap, while maintaining certain minimum quality standards. Various electricity distribution companies and gas pipeline businesses are subject to this type of price-quality regulation under Part 4 of the Commerce Act.

Litigation timeline
In June 2012 the Court of Appeal overturned a decision by the High Court which had been issued in September 2011. The High Court decision arose from an application for judicial review by Vector Limited of the Commission's decision not to determine an input methodology for starting prices.

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