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Commission Intends To Control Transpower Services

Intention to declare control of Transpower’s transmission services

The Commerce Commission today published its intention to declare control of the electricity transmission services supplied by Transpower New Zealand Limited, the owner and operator of the national grid.

The move follows an inquiry into Transpower’s electricity transmission services after the company breached regulatory thresholds set under Part 4A of the Commerce Act.

The Commission’s preliminary view is that the imposition of control will result in long-term benefits for consumers.

The Commission must now have regard to the views of interested parties before it decides whether to make a declaration of control.

By January 27 2006 the Commission will release a paper setting out the reasons for its intention to declare control, which are based on the Commission’s preliminary conclusions from its post-breach inquiry and analysis undertaken to date.

Interested persons may make submissions on the paper. The due date for written submissions is 5pm, 15 February 2006. Cross-submissions will be due by 5pm, 22 February 2006.

The Commission will aim to make a final decision and publish its decision paper by 5pm Friday 17 March 2006.

Background

Part 4A of the Commerce Act came into effect on 8 August 2001 and, among other things, requires the Commission to implement a targeted control regime for the regulation of 28 electricity distribution businesses and the state-owned transmission company, Transpower.

The purpose of the targeted control regime is:

to promote the efficient operation of markets directly related to electricity distribution and transmission services through targeted control for the long-term benefit of consumers by ensuring that suppliers–

(a) are limited in their ability to extract excessive profits; and

(b) face strong incentives to improve efficiency and provide services at a quality that reflects consumer demands; and

(c) share the benefits of efficiency gains with consumers, including through lower prices.

The targeted control regime comprises a number of distinct elements: setting thresholds; assessment and identification; post-breach inquiries (and administrative settlements); and control.

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