Electricity Challenges to Regulatory Regime Continue

Latest happenings in the “new” regulatory regime for electricity lines companies and gas pipeline owners — Parties and Counsel come up for air from High Court appeal to argue price reset methodology requirements before Supreme Court

The “new and improved” regulatory regime for electricity lines companies and gas pipeline owners under Part 4 of the Commerce Act which came into force in April 2009 has already spawned a number of cases. The first was a challenge to the Commerce Commissions starting price adjustment to the Default Price Path for electricity lines companies by Vector Limited.

Vector argued that the Commerce Act required the Commission to determine input methodologies in relation to the price reset it had undertaken. This reset was in effect a revisiting of the price path the Commission was required to put in place as an interim measure before the final form of regulation (which in itself required input methodologies to be developed) was determined. Vector argued that the Commission was required to publish input methodologies for the reset, that it had failed to do so and therefore the reset could not be implemented.

Under the Commission’s price reset proposals, Vector would be required to reduce its prices, but most of the distribution companies would be permitted to increase their prices.

The High Court held as a matter of statutory interpretation, that the Commission was required to publish input methodologies for the purposes of the reset, and the reset was therefore put on hold while the Commission developed the methodologies and began consultation in respect of them. In June 2012, the Court of Appeal overturned the High Court’s decision opening the way for the reset to proceed, and the Commission has taken steps to implement its reset with the release of a draft determination on which submissions were due by 1 October.

Yesterday, the Supreme Court heard Vector’s appeal against the decision of the Court of Appeal.

At stake in the appeal is Vector’s price reduction requirements and price increase for most of the other distribution companies. If input methodologies are required for the reset, then while there will be inevitable delays while the Commission completes its consultation, the real sting in this tail is that once determined although the methodologies will apply from that time, the input methodologies are themselves subject to a merits appeal to the High Court.

The case is illustrative of the fact that now it seems that the interests of all the electricity distribution companies’ interest are no longer completely aligned. As it happens the High Court comprising a High Court judge and two experts has been sitting now for several weeks hearing an appeal by a number of parties including Vector, against the Commission’s input methodologies for the regulatory regime which is to apply for subsequent regulatory periods.

No doubt the electricity distribution companies will await the outcome of the Supreme Court hearing with great interest. Most consumers are unlikely to be aware of these goings on, but for some consumers through-out the country the result will have a significant bearing on the charges they will be required to pay as part of their electricity bills.

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