Court backs Commerce Commission on power prices

Paula Rebstock

The Commerce Commission's right to impose price controls on electricity network companies has been upheld by the High Court, just before the commission's regulatory battle with the state-owned Transpower.

Hawkes Bay network company Unison had challenged the legality of the commission's regulatory powers and the way it went about imposing price controls.

But the High Court dismissed the challenge yesterday, saying there was no sound basis for Unison's criticisms.

The commission said consumers in Rotorua and Taupo would be better off by $193 and $321 a year respectively if it assumed price control over Unison.

Hawkes Bay consumers, who are beneficiaries of the trust that owns Unison, would be better off by about $77.

But before any price controls are imposed, the commission said it would hold public consultations in Wellington, Hawkes Bay, Rotorua and Taupo next month.

The commission is ranging widely across the energy sector, with an inquiry into claims of anti-competitive behaviour and restrictive trade practices among power generators.

It is holding another inquiry into previous breaches of the threshold by Transpower and yesterday's court decision might bolster its case against the electricity network company.

Commission chairwoman Paula Rebstock said despite repeated requests, Transpower had not provided sufficient justification for these breaches.

She said she hoped the industry would take note of the High Court decision and there was a strong public interest in the regime being implemented.

"Certainly, the commission will continue to ensure that all large electricity lines companies are subject to the scrutiny and oversight that Parliament intended when the regime was introduced."

According to the thresholds' regime, Transpower can raise its prices by the rate of inflation minus 1 per cent.

But Transpower said on Friday it would raise its prices by 19 per cent from next April 1 and about 13 per cent for each of the next five years.

The move against Transpower price rises was welcomed yesterday by Employers and Manufacturers chief executive Alasdair Thompson.

He said "only a monopoly would dare announce it was going to raise its charges by 19 per cent" and it was particularly disappointing coming from a state-owned company.

"As Transpower needs to upgrade its transmission lines capacity and capability, we have no doubt it needs extra revenue, but it should borrow and use retained earnings to fund the investment, not dump a 19 per cent hike on its customers," said Thompson.

The commission moved to impose price controls on Unison after it increased prices in April 2002 and March last year.

Unison does accept it breached the thresholds and defended the increases on the ground that prices had been too low and needed to go up to keep the network maintained.

Power Struggle

* A High Court judge has upheld the Commerce Commission's regulation of electricity lines companies after a challenge by Unison.

* This will reassure the commission as it is about to use these regulations to fight Transpower over its plans to keep increasing prices, in breach of "price thresholds".

* Lines companies are regulated because they are monopolies.

* It is not just monopoly lines companies (Vector, Powerco, Unison) that are running foul of the commission.

* Last week it said it was investigating the big generator-retailers to see if they are breaching competition laws.

* Meridian, Genesis, Mighty River Power (state-owned), Contact and TrustPower will be at the centre of this probe.