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Govt boosts monopolies funding by $1.7m/yr, not $2.7m

Thursday 7th July 2011

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The Government has compromised on boosting funding for the Commerce Commission to regulate electricity and gas lines, and airports.

Cabinet has approved an average annual levy increase of $1.7 million for the next three years, after the Ministry of Economic Development (MED) proposed in February either to leave the funding levels as they were, or to increase the baseline funding by $2.7 million a year.

Under Part 4 of the Commerce Act, the commission regulates the price and quality of goods and services in markets which are considered monopolies, and the regulated suppliers pay the commission levies to cover its costs.

Commerce Minister Simon Power said today that the commission's funding levels needed updating because they were set before comprehensive changes to Part 4 in 2008.

"An increase in funding is appropriate to ensure that investors have incentives to innovate, prices charged by monopoly suppliers are not excessive, and service quality standards are maintained," he said.

The additional funding would enable the commission to provide a quality regulation regime for the long-term benefit of consumers.

The present baseline funding of $4.36m in 2012 and $4.66m in 2013 and 2014 has been lifted to $6.08m, $6.01m and $6.72m.

A baseline appropriation for electricity regulation was set at $2.66m in 2004, while for gas it is $1.6m. Airport regulation costs $400,000 (for 2011-2012).

But the commission said earlier this year that these funding levels might be too low to reflect the "lumpy" nature of its work, and sought an extra $2.72m for the three sectors in 2012, $2.35m in 2013, $3.16m in 2014, $2.77m in 2015, and $2.49m in 2016.

It said that this would be equivalent to about 30 fulltime workers, fewer than the 40 which were required for similar work over two years from 2010.

Core staff would be supplemented by consultants and temporary staff where there were peaks in commission workloads.


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