Executive Summary
2. Recent amendments to the Commerce Act mean that new levy regulations are required in order to recover the Commerce Commission's costs of implementing and administering the regulatory regime under Part 4 of the Commerce Act.
3. A separate paper covering the Commission's funding levels for implementing Part 4 has been prepared for the Committee's consideration. The levy regulations will recover the Commission's appropriation for Part 4 activities and, in particular, specify the methodologies for allocating costs between sectors and individual businesses.
4. Levy regulations currently exist for electricity lines businesses and the gas distribution businesses of Powerco and Vector's Auckland network. These regulations need to be replaced to reflect the new regime and to cover other gas networks and major international airports.
5. In October 2008, the Ministry of Economic Development released a discussion paper on the design of the proposed levy regulations.
6. The discussion paper proposed that appropriated Commission costs, including for developing input methodologies1, should be allocated between sectors and sub-sectors on the basis of the Commission's assessment of its costs for each sector, and within this, to individual businesses based on the value of their fixed assets. A number of other detailed design issues such as the timing of invoices and processes for refunds were proposed.
7. Submitters were broadly supportive of the proposed levy design. Exceptions included two airports and Vector Limited (a combined electricity lines and gas pipeline business). One airport preferred allocation on the basis of revenues and another on the basis of passenger numbers. Vector recommended a flat fee plus a variable charge.
8. On the basis of a high level of agreement on the proposed allocation methodology and the absence of agreed alternatives, it is proposed to proceed on the basis of the proposals outlined in the discussion paper. However, it is now proposed that the costs of input methodologies be allocated between regulated sectors (as well as firms) on the basis of fixed asset valuation.
9. Airports and several other submitters expressed concern about the Commission's costs (although this was not the subject of the discussion paper). I have instructed officials to consult in future on the level of funding to be recovered by levy.
10. This paper recommends that the Committee agree to the preparation of replacement levy regulations.
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