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Transpower price rises must be justified

Transpower price rises must be justified: Commerce Commission

Yesterday Transpower, the electricity transmission company which runs the national grid, announced its intention to increase transmission charges by 19 percent from June 2006, and follow this with annual increases of up to 13 percent a year for a further four years.

“The Commerce Commission will not permit Transpower to put in place its announced price increases unless it is satisfied those increases are justified,” Commerce Commission Chair Paula Rebstock said.

Transpower is subject to the regulation of electricity lines businesses under Part 4A of the Commerce Act, which is enforced by the Commerce Commission. Currently, that regime allows Transpower to increase its prices annually by no more than the rate of CPI inflation minus 1 percent, unless the price increase is for investments that have been approved by the Electricity Commission. If Transpower breaches that threshold of performance, the Commerce Commission can, under certain circumstances, take steps to constrain Transpower’s prices.

“The increase announced by Transpower yesterday is clearly outside that CPI minus one percent threshold and is for investments that have not all been scrutinised by independent investigations by either the Electricity Commission or the Commerce Commission. ” said Commerce Commission Chair Paula Rebstock.

The Commerce Commission is currently undertaking an inquiry into previous breaches of the threshold by Transpower. Despite repeated requests from the Commerce Commission, Transpower has not provided sufficient justification for those past breaches.

“In light of the previous breaches by Transpower of the price threshold, and the additional increases announced yesterday, the Commerce Commission will urgently consider whether it is in the interest of consumers to move to the next step of issuing a notice of intention to declare control of Transpower,” Ms Rebstock said.

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