Electricity Industry RegulationsEnterprise and Commerce
The Acting Minister for Enterprise and Commerce, Hon Simon Upton, today clarified the Government's powers and intentions on regulating line businesses.
Mr Upton was responding to calls for the Government to regulate line businesses in the light of the proposed price increases by energy retailers, TransAlta/Southpower and First Electric. The retailers have blamed these increases mainly on charges by line companies.
Mr Upton said the Government already had the power under Part IV of the Commerce Act to impose price control on lines businesses, or to order an investigation by the Commerce Commission on whether price control should be imposed.
"We need to be careful about knee jerk reactions, however. The reforms are only just taking effect, and there is likely to be a considerable settling down period.
"Having said that, lines businesses will need to be very careful not to strain the patience of their consumers or the Government.
"We are determined to ensure that line businesses continue to make efficiency gains and do not take advantage of their market power.
"In the meantime, the Government has previously announced its intention to enhance the threat of price control by taking two further initiatives."
The first is to empower the Commerce Commission to impose price control on its own initiative without the need for any decision by the Government.
This takes decisions on price control out of the political arena.
Secondly, the Government is proposing to introduce a system of ranking line companies on key performance measures like prices, rates of return and reliability. Consistently poorly performing companies will automatically be subject to price control unless the Commerce Commission concludes that this would be inefficient.
The design of this scheme is currently being finalised. It will apply from 1 April this year.
Both changes to the price control regime will be implemented this year by amending the Commerce Act. This will be done at the same time as the penalties and remedies and competition thresholds in the Act are strengthened.
The Government is confident that these measures will impose some real disciplines on lines businesses, Mr Upton said.