Commerce Commission promises an open mind

By BRIAN FALLOW

The Commerce Commission will consider how electricity lines companies' assets should be valued with a completely open mind and as soon as practicable, says chairman John Belgrave.

Legislation now in its final stages gives the commission two tasks: auditing or "recalibration" of the companies' existing valuations, which have been done on an optimised deprival value (ODV) basis, and examining the broader question of whether that is the appropriate methodology.

The commission's draft report on airport pricing rejected an ODV-style approach, raising hopes or fears, depending on your point of view, that it marked a seachange in the way natural monopoly assets would be valued for regulatory purposes.

"I wouldn't draw that conclusion at all," Mr Belgrave said yesterday. The commission would approach the review of the line company valuation methodology with an open mind and there would be ample opportunity for input and a hearing on it.

Initially, the legislation called for the recalibration exercise to be done first. But the commerce select committee's draft report wanted the two exercises done simultaneously.

The bill now calls for the methodology review to be done "as soon as practicable".

Mr Belgrave said the commission had begun the recalibration audit exercise with requests for proposals.

The second stage would look at the methodology for asset valuation from the ground up.