In October 2004, the Government published a Government Policy Statement on Electricity Governance, setting out the Government’s expectations and intentions regarding the interrelationship between the Electricity Commission and the Commerce Commission with regard to the regulation of Transpower and electricity lines businesses by the Electricity Commission under the Electricity Act and the Commerce Commission under the Commerce Act. The Government Policy Statement recorded the Government’s expectation that the two Commissions would work closely together to ensure that their respective roles are well coordinated, and to minimise any scope for uncertainties regarding jurisdictional issues.

Paragraph 107 of the October 2004 Government Policy Statement provided:

The Government requests the two Commissions to develop and publish a Memorandum of Understanding on how they propose to operationalise the coordination of their respective roles.

In October 2006 the Government issued a Government Policy Statement on Electricity Governance, which included a request that the two Commissions review the Memorandum of Understanding to specifically address the following matters in relation to transmission:

• the methodology for determining how each relevant expenditure component in relation to approved grid upgrade plans will be treated over time under the Part 4A thresholds;
• how price setting under a threshold as regulated by the Commerce Commission interacts operationally with the pricing methodology approved by the Electricity Commission;
• how issues relating to valuation methodologies, pricing and pricing methodologies, quality and information disclosure will be coordinated and harmonised where possible between the two Commissions.

The Memorandum of Understanding explains how the Electricity Commission and the Commerce Commission intend to coordinate their respective roles under the Electricity Act and the Commerce Act in accordance with the October 2004 and October 2006 Government Policy Statements. The October 2006 Government Policy Statement is dealt with by way of a protocol incorporated by reference to this Memorandum of Understanding.