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Commission on security of national grid

Commission draft determination does not oppose rules for security of national grid Media Release 1999/78

The Commerce Commission's preliminary view is that the proposed arrangement for determining the quality levels for electricity traded across the national grid does not lessen competition and the Commission would authorise it.

Transpower New Zealand Limited applied for authorisation of the arrangement, which would involve major participants in the electricity sector.

The Commission today published its draft determination giving its preliminary view of the application and listing the areas in which it seeks further information from interested parties.

Commissioner Dr Kate Brown said that the Commission's view is that the agreement is a form of price fixing because it involves grid users, many of whom are in competition with each other, getting together to agree on how the costs of maintaining the quality of electricity supply from the national grid are allocated to each other.

The Commerce Act prohibits price fixing but allows it to be authorised if the Commission is satisfied that public benefits from the specified business practice outweigh detriments from loss of competition. An authorisation, if granted, gives protection from court action under the Act.

Dr Brown said that based on current information the Commission considers that benefits are likely to arise from better decision making by grid users than would be likely by Transpower acting alone.

Dr Brown said that the proposed arrangements are likely to lower transaction costs and enhance the security of electricity supply.

The draft determination states: "… the Commission has concluded at this stage that the proposal does not have the effect of lessening competition in a market. Accordingly it has attributed no competitive detriment to the proposal."

Based on information currently available, the Commission's considers that public benefits from the proposal are likely to be substantial.

Interested parties have until July 14 to make submissions and the Commission expects to make its final decision by July 30.

It is important to note that Transpower has sought authorisation of the proposed decision making process. It has not sought authorisation of individual decisions made through the process nor of specific contracts that may result from those decisions.

In this case, if the process described in the application is authorised, the decisions and contracts that come from it would not have the protection of an authorisation and would still be covered by the Act.

Public copies of the draft determination are available from reception at the Commission's Wellington office, level 7, Landcorp House, 101 Lambton Quay and will soon be on its website

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