10. Interrelationship with the Commerce Commission
120. This section sets out the Government's expectations and intentions regarding the interrelationship between the Commerce Commission and the Commission with regard to the regulation of Transpower and electricity lines businesses by the Commerce Commission under the Commerce Act 1986 and the Electricity Commission under the Electricity Act 1992.
121. The Government expects the Commerce Commission and the Electricity Commission to work together closely to ensure that their respective roles are well coordinated, and to minimise any scope for uncertainties regarding jurisdictional issues.
122. The Government notes that the two Commissions have developed and published a Memorandum of Understanding on their respective roles.
123. The Government's economic policy is that investment and other costs in relation to approved grid upgrade plans should be recoverable by Transpower. The Government also wishes to ensure that interested parties have certainty and clarity on how the two Commissions will operationalise the coordination of their respective roles.
124. Accordingly the Government requests that the Memorandum of Understanding between the Commerce Commission and the Electricity Commission continues to address the following matters in relation to transmission:
- the methodology for determining how each relevant expenditure component in relation to approved grid upgrade plans will be treated over time under the Part 4A thresholds
- how price setting under a threshold as regulated by the Commerce Commission interacts operationally with the pricing methodology approved by the Electricity Commission
- how issues relating to valuation methodologies, pricing and pricing methodologies, quality and information disclosure will be coordinated and harmonised where possible between the two Commissions.
125. In addition, the Government requests that the Commerce Commission and the Electricity Commission review their Memorandum of Understanding by 30 June 2008 to specifically address the following matters in relation to improving incentives for electricity lines businesses in respect of:
- managing distribution losses
- facilitating uptake of advanced metering infrastructure and more efficient distribution pricing
- ensuring target security levels for distribution networks are met at least cost
- ensuring distributors have incentives to invest in, or facilitate investment in energy efficiency (including consumer end-use efficiency), demand side management and distributed generation.
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