Lines company price-cut rules released

By CHRIS DANIELS

Electricity lines companies have learned more details about the way the Commerce Commission wants to regulate their monopoly businesses.

The commission yesterday released details on how it would implement regulations that it announced last month, designed to stop the companies overcharging.

Of particular interest will be details of the "price path threshold", which requires lines companies to reduce their prices by a certain amount.

The commission, in its draft decision, said it expected lines companies to reduce prices by CPI inflation, minus a factor of 5 per cent.

It now says it wants to "better target" this regime, by applying three different levels - such as 1 per cent, 3 per cent and 5 per cent. Companies that have been performing poorly would face a higher percentage figure, meaning they would have to cut their prices more than others.

The idea behind the price path threshold is to force the lines companies, which are monopolies, forcednte into passing on their efficiency gains to consumers by making price cuts.

A blanket formula of CPI minus 5 per cent attracted criticism from the lines companies when first floated, as inefficient firms with bloated cost structures would find it much easier to meet the thresholds than the leaner companies, some of whom have recently cut their prices.

Another potential problem raised by the lines companies was how some of the community trust-owned companies would be treated.

Some operate at break-even level, while others make a profit, then hand it back to consumers by way of dividend or rebate.

The commission yesterday said an adjustment process would be worked out to accommodate these differences.

Submissions on the plans are being accepted by the commission until the end of February. It will then hold a conference between March 10 and March 14 before setting the thresholds which, it hopes, will come into force from April 1 this year.