Fiscal Implications
84. The main additional costs arising from this paper are to develop and set input methodologies. The commission estimates its costs at $4.000 million comprising $1.000 million in 2007/08, $2.000 million in 2008/09 and $1.000 million in 2009/10. This excludes the costs of defending any appeals and judicial reviews but includes the costs of developing input methodologies for airports (subject to decisions regarding airports). Costs would be funded by levy.
85. The costs of merits reviews undertaken by the High Court on input methodologies will be a fiscal cost to the Government. It is difficult to estimate these costs, which will depend on the nature and extent of appeals. It is proposed that merits review costs be funded from the existing Commerce Commission Litigation Fund appropriation, reviewed from time to time as required.
86. The Commission will also incur costs for implementing the proposed new regime for gas pipelines. The Commission estimates its incremental costs as follows:
- Preparation of a default price-quality path for gas pipelines businesses not currently under price control: $1.200 million in 2009/10
- Preparation of gas pipeline information disclosure: $1.000 million in 2009/10 and $0.400 million in 2010/11
- Consideration of any proposals for customised price-quality paths: about $0.700 million per proposal.
87. These costs would be levy funded, except that about 35-40% of the cost of considering any proposals for a customised path could be recovered by fees.
88. Officials consider that the estimated costs for preparing the default price-quality path and considering any customised proposals are too high and are based on a level of information-gathering that is not in line with the proposed approach. Officials recommend that further discussions be undertaken with the Commission on its costings in 2008 in the light of proposed legislative specifications for formulating default paths.
89. The Commission considers that the costs of implementing the default / customised price-quality path regime for electricity lines can be met from within current baselines. Costs relating to airports are contingent on decisions and are covered in that paper.
90. Officials recommend that further discussions be undertaken with the Commission concerning some of its costing as the specifications for the amendments to the Act are fine-tuned, and that recommendations for appropriations for 2008/09 should be made as part of the Budget 2008 process. Any resulting budget bid will have no impact on the operating balance or debt.
91. In the meantime, an appropriation of $1.000 million in 2007/08 is recommended to cover costs to make an early start on the input methodologies. This would be recovered by levy funding on the electricity lines and gas pipelines businesses and will therefore have no impact on the operating balance or debt. In the light of its current work programmes, the Commission recommends a 75:25 division between the two sectors.
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