KEY POINTS:
The Commerce Commission said yesterday it would accept an administrative settlement offer from Transpower instead of placing the state power network operator's transmission services under regulatory control.
"The offer will provide the appropriate incentives for Transpower to continue to efficiently invest in the transmission grid whilst limiting Transpower's ability to extract excess profits. This offer is preferable to control," chairwoman Paula Rebstock said.
The commission released a preliminary paper that it should not declare control of Transpower's transmission assets and should accept Transpower's offer of administrative settlement.
Transpower breached its price path thresholds in 2003-04. In November 2005 it announced a 19.1 per cent price increase, and forecast price increases of 13 per cent on average for the next five years.
The commission responded by saying it would take control of Transpower's transmission services under the Commerce Act.
Transpower then offered an administrative settlement and agreed to suspend and rebate the 19.1 per cent price increase pending the outcome of the commission's investigation.
Yesterday's draft decision means the planned 19.1 per cent price increase would be reduced to 10.2 per cent. The 13 per cent increase proposed for 2007-08, reduced to 2.7 per cent, would be revised up to 8.1 per cent.
"Our preliminary view is that Transpower's settlement offer is consistent with the long-term interests of consumers," Rebstock said.
"This offer means that Transpower has substantially reduced its announced price increases. These prices more closely reflect appropriate levels of recovery on investments it is making in the national grid."
- NZPA
