Commission looking at power rules

The Commerce Commission yesterday released discussion documents on key elements of the new regime regulating suppliers of electricity lines services and gas pipeline services.

Significant changes to the regulation of suppliers, and of specified airport services at Auckland, Wellington and Christchurch airports, were introduced in the Commerce Amendment Act last October.

The services are regulated because they are supplied in markets with little or no competition, and little or no likelihood of a substantial increase in competition.

Among the elements the commission needed to make decisions on are input methodologies to provide increased certainty on matters such as cost of capital, valuation of assets, allocation of common costs and treatment of taxation.

The input methodologies are also to provide certainty on matters such as pricing methodologies and regulatory processes and rules.

Another area where the commission has to make decisions is on price and quality regulation, referred to as price-quality paths.

A specific process also outlines the commission's preliminary views on the options for price-quality regulation of Transpower. The commission also has to make decisions on information disclosure requirements.

The commission said the regulation changes were intended to ensure suppliers of regulated services had incentives to innovate and invest, had incentives to improve efficiency at a quality consumers demanded, shared the benefits of efficiency through lower prices and had limited ability to extract excessive profits.

A fourth document published by the commission yesterday covered revised draft guidelines on its approach to estimating the cost of capital.

The cost of capital would affect the rate of return, the commission said.

- NZPA