Subpart 1 of Part 4A of the Commerce Act 1986, establishes the regulatory regime for large electricity lines businesses (distribution businesses and Transpower). The Commerce Commission is required to set thresholds and assess the performance of lines businesses against those thresholds.
The purpose of the targeted control regime, as set out in section 57E of the Commerce Act, is to promote the efficient operation of markets directly related to electricity distribution and transmission services through targeted control for the long-term benefit of consumers by ensuring that suppliers:
(a) are limited in their ability to extract excessive profits;
(b) face strong incentives to improve efficiency and provide services at a quality that reflects consumer demands; and
(c) share the benefits of efficiency gains with consumers, including through lower prices.
The Commission’s first threshold period covered August 2001 to March 2004. For Transpower it was August 2001 to June 2004.
A new price period (implemented in December 2003) covers the regulatory period of five years beginning on 1 April 2004 of 31 March 2009. Transpower has a one year threshold from 1 July 2004 to 30 June 2005.
In effect, the thresholds are a screening mechanism to identify lines businesses whose performance may require further examination. If one or more of the (price or quality) thresholds are breached by a lines business, the Commission can further examine the business through a post-breach inquiry and, if required, control their prices, revenue or quality.