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Unison’s challenge to thresholds dismissed

Media Release

Issued 28 November 2005/069

Court dismisses Unison’s challenge to electricity thresholds

The High Court has dismissed challenges by Unison Networks Limited to the Commerce Commission's thresholds for large electricity lines businesses.

The Court also dismissed Unison’s challenge to the Commerce Commission’s approach in inquiring into Unison's threshold breaches and deciding whether to publish an intention to declare control.

In particular, the Court held that s 57E of the Commerce Act permits the regulatory regime which the Commerce Commission has designed and implemented. Justice Wild was satisfied that the Commerce Commission has at all times sought to formulate a regime giving effect to the legislation's purpose - to promote the efficient operation of markets directly related to electricity distribution services.

Justice Wild held that the Commerce Commission had the statute's purpose firmly in mind and that the regime gives effect to it. He concluded there was no sound basis for Unison's criticisms, and that the approach favoured by Unison would be more intrusive and could create incentives that are inconsistent with the Commerce Act.

The High Court was "squarely against" Unison's argument that the Commerce Commission could not adopt a forward looking inquiry into Unison's proposed future pricing.

Commerce Commission Chair Paula Rebstock welcomed today’s decision. “The Court has made very clear that the thresholds regime for electricity distribution businesses is robust and that the Commission’s approach is consistent with the purpose of Part 4A of the Commerce Act,” Ms Rebstock said.

Ms Rebstock noted that a previous proceeding in which Unison attempted to stop the Commerce Commission announcing its intention to declare control was dismissed by Court of Appeal in August. In that judgement, Justice Young noted: "It would be wrong to overlook the broad public interest associated with the smooth implementation of regulatory processes contemplated by Parliament.”

“The Commission is hopeful the industry will now take note of the Court’s findings that the regime is consistent with the Act, and that there is a strong public interest in the regime being implemented.”

“Certainly the Commerce Commission will continue to ensure that all large electricity lines companies are subject to the scrutiny and oversight that Parliament intended when the regime was introduced.”

The Commission has set thresholds for distribution business performance under Part 4A of the Commerce Act. The thresholds are a screening mechanism for the Commission to identify distribution businesses whose performance may warrant further examination, and if necessary, control of their prices, revenues, or service quality standards.

Unison breached the Commission’s price path threshold as a result of price increases in April 2002 and March 2004. After an initial review, which established that Unison intended to make further significant price increases in future, the Commission initiated a ‘post-breach inquiry’ into Unison’s recent and planned performance.

On 9 September the Commerce Commission published intention to make a declaration of control in respect of the electricity distribution services supplied by Unison Networks Limited. This follows an inquiry into Unison’s electricity distribution services after the company breached regulatory thresholds set under Part 4A of the Commerce Act. The preliminary findings from the inquiry indicated there would be long-term benefits to Unison’s consumers from control being imposed.

The Commission is currently undertaking a public consultation in relation to its intention to declare control of Unison’s electricity distribution services. A public conference in Wellington began on the 17th and 18th of November and is scheduled to continue the 5th and 6th of December. Further public consultation in Hawkes Bay, Rotorua and Taupo is scheduled for the 14th and 15th of December.


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