Fletcher Challenge group applies for exemption

Fletcher Challenge group applies for exemption from Electricity Industry Reform Act

Media Release 1999/75

The Commerce Commission has received an application from Fletcher Challenge Limited (FCL) for an exemption from the Electricity Industry Reform Act (EIR Act) for all nine Fletcher Challenge group companies that have interests in electricity.

Commission Acting Chairman Mark Berry said that this is the first application the Commission has received that relates to a diverse range of interests and activities. Previous applications from non-traditional power companies have been for exemptions for one or two specific activities or industrial sites.

"The Fletcher Challenge group has wide-ranging electricity interests throughout the country," Mr Berry said. "Because the companies are interconnected, it is their total electricity interests that must be looked at under the EIR Act."

One of the companies in the group, Fletcher Property Limited (FPL), had previously applied for an exemption from the EIR Act. The FPL application has been withdrawn and is replaced by this group-wide application.

The EIR Act requires companies involved in electricity markets to either separate their lines business from their electricity supply and generation businesses, or have an exemption from the Commission.

In its application, FCL states that the group is involved in electricity supply businesses through: Natural Gas Corporation, the Kapuni Gas Treatment Plant joint venture, Fletcher Challenge Power Limited, Tasman Pulp and Paper Company Limited, Fletcher Challenge Forests Limited, Fletcher Challenge Energy, Fletcher Property Limited, Fletcher Wood Panels Limited, Firth Industries Limited, Winstone Aggregates Limited and Golden Bay Cement Limited.

It states that it is involved in electricity lines businesses through: Fletcher Property Limited, Fletcher Wood Panels Limited, Tasman Pulp and Paper Company Limited, the Kapuni Gas Treatment Plant joint venture, Fletcher Challenge Forests Limited, Firth Industries Limited and Golden Bay Cement Limited.

Mr Berry said that the Commission does not yet have a specific date by when it expects to make its decision.

Background

In considering an exemption, the Commission must answer three questions:

1. Would the exemption inhibit competition?

2. Would the exemption allow cross-subsidisation between electricity generation and lines businesses?

3. Would the exemption create a relationship between electricity lines and supply businesses, which is not at arms length?

"The presumption must be that if the answer to any of these questions is 'yes', the Commission must not grant an exemption from the EIR Act," Mr Berry said.

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