Introduction
Introduction
1. A new Part 4 of the Commerce Act 1986 (the Act) puts in place a revised regulatory regime for electricity lines businesses (including Transpower), gas pipelines and major international airports1. This new Part 4 has replaced Parts 4 and 4A and sections of Part 5 of the Act. The purpose of Part 4 is to promote the long term benefit of consumers in markets where there is little or no competition by promoting outcomes that are consistent with outcomes produced in competitive markets.
2. Key changes to the regulatory regime under the Act for each sector are outlined in section 1.3 below. Details of the specific elements of regulatory regimes for the three sectors are outlined in section two.
1.1 Levy Regulations
3. Electricity lines businesses and controlled gas pipeline businesses are currently levied for the costs of regulation under the following regulations:
- Electricity Line Owners (Commerce Commission Costs) Levy Regulations 2001;
- Commerce (Levy for Control of Natural Gas Services) Regulations 2005.
4. A new section 53ZE of the Act provides for levy regulations to recover from every supplier of regulated goods or services the estimated costs of the Commerce Commission in performing its functions, powers and duties under Part 4.
5. To implement the new Part 4, amendments are required to electricity and gas sector levy regulations to reflect the new regime. In addition, levy regulations are to be developed to levy regulated international airports for the costs of information disclosure.
6. Revised levy regulations are to be in place by 30 June 2009 in order to collect levy funding for the 2008/09 financial year.
1.2 Process
7. The purpose of this discussion paper is to propose options for levy design for the revised regulatory regime under Part 4 of the Act, and to seek the views of electricity lines businesses, gas pipeline businesses, international airports and other interested parties on the options.
8. Levy design issues for all three sectors are considered together given commonalities between the regulatory regimes for these sectors. There is overlap between the businesses being regulated in the electricity and gas sectors. In the case of input methodologies, there is overlap in terms of applicability to all sectors, and costs are shared between the three sectors.
9. We welcome feedback on the options proposed and section four provides details on how submitters can provide feedback on levy design options to ensure their views are taken into account in developing regulations.
10. Following the closing date for consultation, analysis of submissions will be undertaken before final options for allocating levies in the three sectors are recommended to Ministers and regulations drafted.
11. The paper is not consulting on the level of funding or the total amount paid by levy payers in each sector. Indicative amounts are set out in section two.
12. The proposals in this document have been developed in light of the Audit Office Guidelines on Charging Fees for Public Sector Goods and Services (2008) and the Treasury's Guidelines for Setting Charges in the Public Sector (2002).
13. The Ministry of Economic Development confirms that the substantive regulatory impact analysis elements are included at an appropriate level in the discussion document.
1.3 Key changes to Commerce Act for regulated businesses
Electricity Lines Businesses
14. Electricity lines businesses previously subject to Part 4A are now to be subject to the following regime:
- From 1 April 2009, 100 percent consumer—owned lines businesses that meet certain criteria will be subject only to information disclosure. A list of such lines businesses is to be published in the Gazette.
- The consumers of a lines business subject to information disclosure only can petition the Commerce Commission to investigate that business and make a recommendation to the Minister on whether that business should become subject to a price-quality path regime (and be removed from the Gazette list).
- All other lines businesses will be subject to both information disclosure and a ‘default/customised price-quality path' regime, which replaces the Part 4A thresholds. Under the new regime:
- The Commerce Commission will set a default price-quality path for a regulatory period based on information like productivity trends and profitability;
- Businesses are able to propose a customised path to the Commerce Commission, with a requirement for the Commission to make a decision within a specified period.
Controlled Gas Pipeline Businesses
15. Gas pipeline businesses are now to be subject to:
- an information disclosure regime under the Commerce Act 1986, which replaces the previous information disclosure requirements under the Gas Act 19922.
- a default/customised price-quality regime from 1 July 2010
16. Gas pipelines that are currently under Part 5 control (Powerco and Vector's Auckland pipelines) will transition to the default/customised price-quality regime at the expiry of the Order in Council imposing control, in 2012 or any earlier date agreed with the Commerce Commission.
17. The regulatory regime does not consider the following to be pipeline services:
- conveying natural gas to a gas processing facility;
- conveying natural gas of less than 75,000 GJ per annum per pipeline;
- conveying natural gas for supply to industrial and commercial consumers located within 1km of a gas station or existing gas pipeline;
- conveying natural gas by a pipeline that is listed in Schedule 6 of the Act.
Major International Airports
18. From 1 July 2010, Auckland, Wellington and Christchurch international airports will be subject to an information disclosure regime under the Commerce Act, which will replace the current information disclosure regime under the Airport Authorities Act 1966. Prior to this date, the Commerce Commission is required to develop input methodologies that the airports will be required to use in preparing their regulatory accounts for disclosure.
19. The Commerce Commission is required to report to the Ministers of Commerce and Transport as soon as practicable after any new price for a specified airport service is set in, or after 2012 on the effectiveness of the information disclosure regime in promoting the purpose of part 4 of the Act for major international airports.
Input methodologies
20. The Act requires the Commerce Commission to develop input methodologies in an up-front stand alone process for all three sectors by 30 June 2010. Input methodologies will outline the rules, process and requirements relating to regulation. Input methodologies are designed to provide greater certainty, transparency and predictability to businesses (including businesses not subject to regulation). They will play a key role in setting information disclosure requirements and price-quality paths.
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