22 May 2006

Transpower to remain under Commerce Commission

State-owned transmission company Transpower is to remain under the jurisdiction of the Commerce Commission for the present time, Energy Minister David Parker announced today.

This decision follows a proposal, released for discussion by the Economic Development Ministry last November, to transfer the Commerce Commission's oversight of Transpower under Part 4A of the Commerce Act to the Electricity Commission.

Currently, like other large electricity lines businesses, Transpower is subject to a targeted control and information disclosure regime administered by the Commerce Commission. This regime is set out in Part 4A of the Commerce Act.

Mr Parker said that, following consideration of the submissions received, including those of the Commerce Commission, Electricity Commission and Transpower, the transfer will not take place at this time.

"There are a number of reasons for my decision.

"Firstly, both the Commerce Commission and the Electricity Commission are currently involved in significant work that could be adversely affected by a transfer. The Commerce Commission recently announced its intention to declare control of Transpower's transmission services, a process that could be adversely affected by a transfer. And the Electricity Commission's current heavy work programme, which includes significant transmission work, could be jeopardised by adding further responsibilities at this time.

"In addition, if Transpower were transferred, jurisdiction under Part 4A for other large electricity lines businesses would remain with the Commerce Commission. That could lead to increased uncertainty if each Commission has a different approach to their administration of Part 4A.

"I am also aware of submitters' concerns that the Electricity Commission is a Crown Agent, rather than an independent Crown Entity like the Commerce Commission. Submitters also expressed the view that there is a need for a deeper review of the regulatory framework for transmission.

"I have decided to revisit the transfer in one year. By then, these issues will be clarified, the Commerce Commission's investigation should be complete and the Electricity Commission's current heavy workload should have eased."

Jurisdiction under Part 4A of the Commerce Act in respect of Transpower will remain with the Commerce Commission until the issue is reconsidered.

Mr Parker said when this issue was revisited, it was likely to consider whether jurisdiction under Part 4A should also be transferred for other electricity lines businesses.

"Submitters also commented on the need for a completed Memorandum of Understanding between the Commerce Commission and Electricity Commission on coordination of their respective roles. I am pleased to be advised that the Memorandum of Understanding has now been finalised."

For further information, please contact CATHIE BELL on 027 4998467

Background information

What are Transpower's current governance arrangements?

Transpower owns and operates the national electricity transmission network ("the grid"). Transpower, like other large electricity lines businesses, is subject to a targeted control and information disclosure regime administered by the Commerce Commission under Part 4A of the Commerce Act.

Transpower is also subject to Part F of the Electricity Governance Rules 2003, under which the Electricity Commission approves Transpower's grid upgrade plans, and recommends rules for transmission quality standards and the terms and conditions for transmission services.

How would Part 4A jurisdiction pass from the Commerce to the Electricity Commission?

Section 57DB of the Commerce Act provides for the transfer of Part 4A jurisdiction for Transpower, on the recommendation of the Minister of Energy, from the Commerce Commission (to the Electricity Commission at any time by Order in Council.

Before an Order in Council can be made, the procedure in section 57DD of the Commerce Act applies. That is, the Minister has to: · consult with representatives of industry participants and representatives of consumers · consult with the Electricity Commission and Commerce Commission and seek a recommendation from them · be satisfied that the transfer of jurisdiction would result in the more efficient and effective achievement of the purposes of the relevant legislation; and lower compliance costs for industry participants in the electricity distribution and transmission markets.

Where can I find the discussion paper and submissions?

On 16 November 2005, the Ministry of Economic Development released a discussion paper to canvass the view of interested parties on whether jurisdiction under Part 4A for Transpower should transfer to the Electricity Commission. The discussion paper and submissions received are available on the Ministry's website at http://www.med.govt.nz/electricity/part4a-transpower/.

ENDS

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