Commerce Commission grants exemption to Mark Tume

Media Release - Electricity Industry Reform Act: Commerce Commission grants exemption to Mark Tume

The Commerce Commission has granted Mark Tume an exemption under the Electricity Industry Reform Act 1998 (EIR Act) in relation to his potential appointment to the board of Powerco, subject to certain conditions.

Currently Mr Tume is a director of Infratil Ltd which is the majority shareholder of TrustPower, a generator and seller of electricity. If he was appointed to Powerco’s board he would have prohibited involvements in generation and sale of electricity and in electricity lines under the EIR Act. It was for this reason that he applied for exemption.

Commission Chair Dr Mark Berry said, provided the conditions are met, the Commission had determined that the granting of the exemption would not create incentives or opportunities to inhibit competition in the electricity industry or to cross subsidise between lines activities and electricity generation or selling activities. Dr Berry said that the Commission gained further comfort as to these issues because Mr Tume would still have to comply with Arm™s Length and other rules that are part of the EIR Act.

A public version of the Commission’s decision is available on the Commission’s website www.comcom.govt.nz under Public Registers/Electricity Industry Reform Act – Exemptions
Background

The electricity industry has four main parts: electricity generation, electricity transmission, electricity distribution (lines businesses) and electricity supply. Only generation, distribution (lines) and supply are covered by the EIR Act.

The EIR Act provides for the Commission to make exemptions in terms of section 81 of the EIR Act. In considering applications for exemptions, the Commission will have specific regard to the particular purpose of Parts 1 to 3 and 5 of the EIR Act as defined in section 2(2) of the EIR Act. The Commission is likely to grant an exemption in respect of a business or involvement or interest only where doing so:

(a) would not result in certain involvements in electricity lines and electricity generation and sales that may create incentives or opportunities:
(i) to inhibit competition in the electricity industry; or
(ii) to cross-subsidise generation or retail activities from electricity lines activities; and
(b) where applicable, would not result in relationships between a business that has involvement in electricity line and a business that has involvement in certain electricity generation connected to that line, where those relationships may not be carried out otherwise in separate companies or be at arm’s length.

In determining exemption applications, the Commission will also have regard to the overall purpose of the EIR Act as set out in section 2(1) of the Act. That is, the purpose of the EIR Act is to reform the electricity industry to better ensure:

* that costs and prices in the electricity industry are subject to sustained downward pressure; and

* that the benefits of efficient electricity pricing flow through to all classes of consumers; and

* new investment in generation from renewable energy sources by –

* effectively separating electricity lines from generation and retail where those activities are co-located; and

* promoting effective competition in electricity generation and retail; and

* limiting barriers to new investment in generation from renewable energy sources.

ENDS

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