Appendix 1: Glossary of Terms
- Airports inquiry
- an inquiry into whether airfield activities should be controlled at the three major international airport companies at Auckland, Wellington and Christchurch; undertaken by the Commerce Commission in 2002.
- Comparative benchmarking
- a methodology for setting control terms based on high degree of assumption, approximation and statistical averaging.
- Control period
- a period of time over which regulatory control terms apply.
- Control terms
- terms and conditions for regulatory control as determined by the regulator.
- Customised approach
- a methodology for setting control terms based on firm specific information.
- Economic regulation
- government rules that are intended to influence and/or modify the economic behaviour of firms with respect to both price and quality of supply.
- Gas inquiry
- an inquiry into whether or not supply of gas pipeline (transmission and distribution) services should be controlled; undertaken by the Commerce Commission in 2004.
- Input methodologies
- methodologies for how to calculate key parameters of regulatory control.
- Judicial review
- a review of the regulator's decisions and processes. The grounds for review can be broadly characterised as illegality (including acting outside the scope of its powers or making errors or law), unfairness (including breach of natural justice and poor process) and unreasonableness.
- Market power
- an ability of a firm (or group of firms) to raise and maintain prices and/or restrict quality/quantity relative to price and quality/quantity than would prevail under competition.
- Merits review
- a review of the substance and reasoning of the decision itself. It requires a person, or a body (other than the primary decision-maker) to reconsider the facts, law, reasoning and other relevant aspects of the original decision. The process of review may be described as "stepping into the shoes" of the primary decision-maker. The result of merits review is the affirmation or variation of the original decision.
- Monopoly rent
- a surplus captured by a monopoly supplier, which can be extracted because consumers place a greater value on a good or a service than the cost of producing it.
- Natural monopoly
- a situation where there are economies of scale, sunk costs and barriers to entry such that it is only economic for one firm to supply the market.
- Regulatory control
- a form of economic regulation, whereby the regulator, not the firm, sets the terms and conditions (such as price, quality or quantity) under which a good or a service is to be supplied.
- Thresholds regime/thresholds
- a regulatory regime, currently applied to electricity lines businesses, under which the Commerce Commission sets certain thresholds which, if breached, can lead to an inquiry into whether regulatory control should be imposed.
- Wealth effects
- a transfer of wealth from one group to another, with no corresponding increase in total wealth in the economy as a whole.
- Workable competition
- perfect competition is an economic model that describes a hypothetical market form in which no producer or consumer has the market power to influence prices. Workable competition is an economic model of a market in which competition is less than perfect, but adequate enough to give buyers genuine alternatives.
Desirable characteristics of a regulatory regime:
- Regulatory certainty
- refers to a stable regulatory environment, where outcomes are predictable.
- Consistency
- refers to an adherence to the same principles, rules and methodologies across sectors, firms and time.
- Transparency
- refers to an environment where the rationale for the decisions is provided to the public in a comprehensible, accessible, and timely manner.
- Flexibility
- refers to an ability to account for different/changing market circumstances.
- Regulatory accountability
- refers to the regulator being held responsible for carrying out its task, and for conforming with legislative requirements.
- Regulatory independence
- refers to the regulator being autonomous of firms and government.
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