Worth Richard: Commerce Amendment Bill — First Reading 
Worth Richard: Commerce Amendment Bill — First Reading 
[Volume:646;Page:15163] 
Dr RICHARD WORTH 
: It is an argument that is often run on a number of bills and we saw how successful it can be in the Limited Partnerships Bill. One needs only to look at the concessions that were made by the ministry officials to see that in some areas when practical consideration is taken of particular provisions change may well be justified. I am certain that that will be the case here. 
It has been said that the Commerce Amendment Bill gives better incentives for infrastructure investment and that infrastructure businesses—like electricity lines companies and airports—will gain improved incentives to innovate and invest while consumers will be given protection from excessive prices and poor quality. As others have said the bill amalgamates Parts 4 and 4A of the Act which apply to sectors where there is little or no competition or prospect of competition such as electricity lines gas pipelines and now airports. Sectors like these are regulated as the Minister of Commerce said in other OECD countries. 
A number of instances may well have triggered the need for the types of changes that we see in the bill—particularly in the electricity industry. For example in January 2006 the Commerce Commission announced that it intended to take control of Transpower’s prices. The State-owned enterprise needed to spend staggering sums—perhaps in the order of $4 billion. It had submitted some of those projects to the Electricity Commission for approval. The Electricity Commission’s job was to satisfy itself that the proposed spending was efficient and Transpower—with some justification I would say—assumed that if it got the tick-off from the Electricity Commission it could reasonably get past the other taskmaster the Commerce Commission. But that was not to be; the Commerce Commission leapt in effectively overriding not only Transpower’s board but also the Electricity Commission. 
We also saw the impact of intervention in the market and how that can produce inappropriate impacts in connection with events touching Vector that members of the House may recall. Several years ago Vector’s shares had closed at $2.41. The Government issued two policy statements to which the Commerce Commission had to have regard effectively telling the regulator to ease up on the electricity lines industry. The next day Vector shares jumped 24c adding $240 million to its market value. A day later the commission announced its intention to take price control of Vector. It said Vector would make excessive profits of between $13 million and $70 million in the next year; the share price plunged 27c wiping $270 million off Vector’s value. It will be recalled that some analysts described the commission’s action as bizarre. Whether it was or was not is not really the issue in debate here but it does point to the need for a better-developed regime. 
The bill also introduces a purpose statement specifically for this part of the Act to give clearer guidance to the courts and the regulator that the aim of regulation is to promote investment. 
As I see it there are seven main changes to the bill. Firstly for the first time there is a clear emphasis on the importance of incentives for regulated businesses to invest. Second there is a requirement for the Commerce Commission to clearly set out the regulatory rules which are called input methodologies applying to these businesses and to complete this work by 30 June 2010. As others have said these rules will be subject to merits review by the High Court. Merits review is a review as to the merit of the decision as distinct from whether there are errors of law disclosed in the reasoning process. Clearly specifying the rules will greatly improve certainty and predictability for businesses and improve business confidence. 
Third the main changes will allow what one could call “fit for purpose” regulation such as information disclosure and a negotiate/arbitrate regime as an alternative to full price control. Fourth there will be a much simpler and more predictable regime for electricity lines businesses removing the threat of relatively heavy-handed regulation for minor breaches of thresholds and with time limits for commission decisions. Fifth there is a more appropriate regime of information disclosure for small electricity lines businesses owned by local consumers where the customers are essentially the owners of the business. That is obviously going to lower their compliance costs; it will result in savings to consumers. Sixth there is an enhanced regime for gas pipelines which enables the proposal of a price path to the commission. Seventh there is a more robust information disclosure regime compared with that of the Airport Authorities Act for the Auckland Christchurch and Wellington international airports with monitoring by the Commerce Commission. 
Finally the bill also includes some tidying-up relating to the clearance or authorisation of business mergers. I think probably the most significant changes centre on section 69. There is a new provision to enforce undertakings that are made by parties to the proposed merger. 
I welcome the further debate on this bill and its merit. These regulatory frameworks are particularly important.