Electricity Lines Businesses Control Determination

Electricity Lines Businesses: Commission releases draft guidelines for determining whether to declare control

The Commerce Commission today released draft guidelines relating to the regulation of large electricity lines businesses. This work is part of the Commission’s continuing development of a regulatory regime for lines businesses, as required by Part 4A of the Commerce Act.

The draft guidelines set out the process and analytical framework the Commission proposes to follow when assessing lines businesses against thresholds set by the Commission for the declaration of control and when conducting an inquiry to determine whether or not to declare control in relation to a lines business. The Commission can investigate lines businesses if they breach the thresholds, and determine whether or not to declare control of goods or services supplied by those businesses.

The Commission also released today a paper prepared for the Commission by Dr. Martin Lally, titled The Weighted Average Cost of Capital for Electricity Lines Businesses. The weighted average cost of capital for an electricity lines business is an important element of the Commission’s analytical framework described in the draft guidelines. The Commission intends to draw on Dr. Lally’s paper when it applies the analytical framework.

The Commission’s draft guidelines and Dr Lally’s paper can be found on the Commission’s website, www.comcom.govt.nz.

Thresholds for the declaration of control set by the Commission are a screening mechanism to identify electricity lines businesses whose performance may require further investigation and, if necessary, control by the Commission. The Commission set a price path threshold and a quality threshold on 6 June 2003 and will make its first assessments of lines businesses’ performance against those thresholds toward the end of this year. Interested parties are invited to make written submissions on the draft guidelines by 8 September 2003. The Commission will release final guidelines after considering submissions.

Further details regarding the thresholds set by the Commission for the declaration of control in relation to large electricity lines businesses can be found in a notice, published in the New Zealand Gazette on 6 June 2003 (the Commerce Act (Electricity Lines Thresholds) Notice 2003), and in a decision paper (Regulation of Electricity Lines Businesses, Targeted Control Regime, Threshold Decisions), published by the Commission also on 6 June 2003.

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