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Background


EGI Cabinet paper and RIS

[ Last Updated 20 April 2009 ]


11. The Commerce Amendment Act was passed in September 2008 and introduced a new Part 4 which, amongst other things, introduced a revised regulatory regime for electricity lines businesses (including Transpower), gas pipeline businesses and major international airports. The overall objective of the amendments was to improve incentives for regulated businesses to invest and innovate whilst protecting consumers from excessive prices and poor quality.

12. The new regime under Part 4 provides that:

  • Electricity lines businesses are subject to information disclosure and default/customised price-quality regulation unless they are consumer-owned under the Act, in which case they will be subject to information disclosure only;
  • Gas pipelines are subject to information disclosure and default-customised price-quality regulation;
  • Auckland, Wellington and Christchurch International Airports are subject to information disclosure.

13. Part 4 also provides transitional regulatory arrangements relating to:

  • Powerco's and Vector's gas pipelines businesses that are currently subject to an Authorisation2. Powerco and Vector are able to transition to a default-customised regime after the expiry of the term of the Authorisation in 2012.
  • Enforcement of the Transpower administrative settlement3. Part 4 requires the Commission to report to the Minister by 2011 on the regime that will apply to Transpower following the expiry of this settlement.

14. To provide greater certainty, one of the key requirements under the new Part 4 is for the Commission to develop input methodologies for regulated sectors by 30 June 2010. Input methodologies are the set of rules relating to how regulatory accounts are to be prepared and regulatory processes under Part 4.

15. The costs of implementing the new Part 4 can therefore be divided into (i) the costs of developing input methodologies for electricity, gas and airports sectors, and (ii) the costs of developing and administering regulatory requirements for regulated businesses in each sector.

16. Part 4 provides for the Commission's costs of implementing and administering the regulatory regime under Part 4 of the Commerce Act to be recovered through a levy on regulated parties.

17. The existing electricity and gas sector levy regulations need to be replaced with new regulations to reflect the new regime, including covering major international airports.

2 The Authorisation was issued on 31 October 2008 and provides for price control of the natural gas distribution services of Vector and Powerco through to 1 July 2012. 

3 An administrative settlement is an alternative to control being imposed when a price threshold is breached under Part 4A. This involves the Commission and the company agreeing to pricing levels and quality measures for a period of up to five years.


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