Tisch Lindsay: Commerce Amendment Bill — In Committee Third Reading 
Text is incorporated into the Bound Volume 
Tisch Lindsay: Commerce Amendment Bill — In Committee Third Reading 
[Sitting date: 02 September 2008. Volume:649;Page:18543. Text is incorporated into the Bound Volume.] 
LINDSAY TISCH (National—Piako) 
: 
 One of the most controversial parts of the select committee process was dealing with the inclusion of airports. Although we came to some consensus that they should be included in the disclosure regimes there is probably more debate over this than on any other point. I have a particular interest in airports—I mentioned this in the second reading—so I want to concentrate my comments just on the airport part of the bill. Airports were a late inclusion and as I have said National feels that they should be included in the regime.  
One of the issues that came out when we were trying to set a pricing regime was whether companies should be operating as a whole. The argument came forward that in airport company situations they were not: they were not operating as a single till each of their entities was separately in a charging regime so that they became profit centres. One of the arguments was simply that if we want to have some fairness and equity in terms of setting prices we should actually be looking at their operating as a whole.  
The information supplied to the committee indicated that some airport companies over-recovered in regard to their airfield activities under the Commerce Commission scenario based on historic cost of those specialised assets and also under the Commerce Commission scenario of using the optimised depreciated replacement cost which is the optimised deprival value for specialised assets. We were keen to make sure that this part of the debate was fully canvassed and as I said it was the most controversial.  
The bill now has a regulatory regime that allows for the setting of the airport charges and moves it away from the Airports Act into the Commerce Commission. But I say to the Minister I need some clarification in terms of what we are looking at with the methodology. We have just had an inquiry into State-owned enterprise valuation methodology and my understanding is—and the Minister’s advisers here today may be able to help me with this—that the aim of applying the optimised deprival value methodology is to value the assets at the cost to the owner of reinvesting in that business if he or she was deprived of those assets.  
So if they were taken away what actually is the methodology we would use? The optimised deprival value methodology is usually higher than the historic cost. My understanding is that in New Zealand the post-tax nominal weighted average cost of capital is normally used. The next point is that the rate works perfectly well with the historic cost valuation. The next point is that combining the post-tax nominal weighted average cost of capital and the revalued assets can create a double counting of the inflation effect. Those are questions that the Minister with her advisers may be able to help me with.  
On the other side of the equation of course we heard that although the airlines and the Board of Airline Representatives of New Zealand in particular were keen to have the airports included in the Commerce Amendment Bill the airports—which would argue that they have for the last 20 years operated very successfully without this new regime—were not happy that this was included. They gave examples of where there are deregulated regimes. They mentioned Stansted and Manchester in the United Kingdom and they mentioned Sydney. But we felt that at the end we need to have this fair and consistent so that there was some equity and that we were not operating where monopolies could be seen to be operating and that including the airports in this bill was the right way to go. So with those points I would be interested in the Minister’s reply to me as to the clarification of those valuation methodologies which she may be able to help me with.