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Don’t generalise from Aussie attack on our price regulation

  • December 20th, 2013

The Aussie fund manager quoted in today's on-line NBR (behind the pay-wall sorry) saying Australia is a more favourable regulatory jurisdiction, might be getting some under-arm kiwi advice.

The Vector predicament covered in the same NBR is the result of applying an Aussie regulatory approach, to question the generosity of the NZ regulator toward suppliers.

NBR has picked up my blog yesterday. I did not go into the detail of our High Court reasoning, though I gave the paragraph references. Essentially, all the High Court has done in the area that matters to MEUG and consumers generally, is apply Aussie rigour.

The Court looked for the same standard of proof and foundation for assumptions by the Commerce Commission, as is required of  Aussie utilities. The Court could not find it. We cited the leading Australian case to the Court because the NZ regulator has been deliberately generous to suppliers, based on assumptions that are novel, internationally, and in our view unsupportable.

In other words, any price downgrade of NZ line company values arising from MEUG's success will probably just take prices to where they should have been, if the suppliers had not badgered the Commission into assuring them indefinite long term above market returns – a favourable treatment for which the Court could see no justification.

Comments

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So- it seems to me that we have come in a big circle. One upon a time, the power prices were set by the NZ Electricity Department, a part of the NZ Government. After progressing through various iterations of privatization and pseudo-free-market, we have now reached the situation where the power prices are effectively set by the Commerce Commission, a part of the NZ Government. Perhaps it is time for me to do some more revision of Alice through the Looking Glass!

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  • Stephen
  • December 21st, 2013
  • 6:04 pm

John

There is a big distinction between the pricing of lines monopolies, and generation – which has a great deal of competition, and much disruption from new entrants and new technologies).

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Steven- Your point is accepted- I admit hadn’t thought it through.

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