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Electricity Industry Act 2010

Amendments to other enactments

Schedule 2: When person is involved in industry participant for purposes of section 6A

You could also call this:

“Who counts as part of an electricity company under the law”

This schedule explains when a person is considered involved in an industry participant for the purposes of section 6A of the Electricity Industry Act 2010. It outlines:

  1. The purpose of the schedule, which is to exclude certain interests from specific Code provisions and ownership separation rules, and to help interpret those provisions and rules.

  2. Interests in distributors and generators that are too small to be counted. For example, lines not connected to the national grid or the conveyance of less than 5 GWh per year are not considered.

  3. Other interests that are not counted, such as those exempted by the Authority, interests held as security for loans, or interests held by certain financial market participants.

  4. The meanings of important terms like “control rights”, “equity return rights”, and “material influence” in relation to involvement in an industry participant.

  5. The definition of “associate” and how relationships between people or companies are considered when determining involvement.

  6. The importance of considering the substance of involvement rather than just the form when determining a person’s level of involvement in a business.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM2510077.

Topics:
Business > Industry rules Money and consumer rights > Consumer protection
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2When person is involved in industry participant for purposes of section 6A Empowered by ss 73, 74, 94

1Purpose of this schedule

  1. The purpose of this schedule is—

  2. to exclude certain interests from the application of Code provisions imposed under section 32(3) and (4); and
    1. to exclude certain interests from the application of the ownership separation rule in section 73; and
      1. to help in interpreting—
        1. any Code provisions referred to in paragraph (a); and
          1. section 73.

          Notes
          • Schedule 2 clause 1: replaced, on , by section 49(2) of the Electricity Industry Amendment Act 2022 (2022 No 46).

          2Interests in distributors that are too small to count for purposes of section 6A

          1. No account is to be taken, for the purpose of determining under section 6A whether a person is involved in a distributor, of any of the following:

          2. lines that are not connected, directly or indirectly, to the national grid (for example, certain lines in Haast, the Chatham Islands, and Stewart Island):
            1. the conveyance of electricity only from a generator to the national grid or from the national grid to a generator:
              1. the conveyance of less than 5 GWh per financial year:
                1. the conveyance of electricity solely for the consumption of a person who is involved in the distributor or for the consumption of any of the distributor's associates:
                  1. the conveyance of electricity (other than via the national grid) only from a generator to a network or from a network to a generator:
                    1. the conveyance of electricity mostly in competition with another line or lines operated by another electricity business that is not an associate of a person who is involved in the first line, provided that the competition is actual competition and not potential competition.

                      Compare
                      • 1988 No 234 s 6
                      • 1998 No 88 s 19
                      Notes
                      • Schedule 2 clause 2 heading: amended, on , by section 49(3) of the Electricity Industry Amendment Act 2022 (2022 No 46).
                      • Schedule 2 clause 2: amended, on , by section 49(4) of the Electricity Industry Amendment Act 2022 (2022 No 46).

                      3Interests in generators that are too small to count for purposes of section 6A

                      1. No account is to be taken, for the purpose of determining under section 6A whether a person is involved in a generator, of any of the following interests:

                      2. an interest in an irrigation scheme, where—
                        1. that scheme is physically connected to a generator or core generation assets and was built and is operated primarily for the purpose of irrigation; and
                          1. that person does not hold, through the person's interest in the scheme, any equity return rights or control rights in, or manage or operate, the generator or core generation assets; or
                          2. an interest in a business that generates electricity from a geothermal energy source if—
                            1. the geothermal plant was commissioned between 1 January 1998 and 1 January 2009, and is currently owned by the person that commissioned it; and
                              1. the output from the geothermal plant is less than 12 MW (determined according to nameplate); or
                              2. the generation of electricity that does not have a total annual nominal capacity greater than 5 GWh per year (determined according to nameplate).

                                1. In this clause, nameplate has the meaning given in section 73(3).

                                Compare
                                • 1988 No 234 s 6
                                • 1998 No 88 s 19
                                Notes
                                • Schedule 2 clause 3 heading: amended, on , by section 49(5) of the Electricity Industry Amendment Act 2022 (2022 No 46).
                                • Schedule 2 clause 3(1): amended, on , by section 49(6) of the Electricity Industry Amendment Act 2022 (2022 No 46).
                                • Schedule 2 clause 3(2): inserted, on , by section 49(7) of the Electricity Industry Amendment Act 2022 (2022 No 46).

                                4Other interests that are not counted for purposes of section 6A

                                1. No account is to be taken, for the purposes of section 6A, of a person's business or involvement if—

                                2. the business or involvement is exempted by the Authority under section 90, or section 11, if the exemption under section 11 is an exemption from a Code provision that relates to corporate separation or arm’s-length rules (as defined in section 44C); or
                                  1. the ordinary business of the person consists of, or includes, the lending of money, and that person has the involvement only as security given for a loan or guarantee of a loan entered into in the ordinary course of the business of that person or as a result of enforcing that security; or
                                    1. that person is authorised to undertake trading activities on a licensed market (within the meaning of section 6(1) of the Financial Markets Conduct Act 2013) and has the involvement by reason only of acting for another person to acquire or dispose of a financial product on behalf of the other person in the ordinary course of business of carrying out those trading activities; or
                                      1. that person—
                                        1. has the involvement by reason only that he or she has been authorised by resolution of the directors or other governing body of a body corporate to act as its representative at a meeting or meetings of members, or a class of members, of another person; and
                                          1. has no discretion to determine how to represent the body corporate at the meeting or meetings; or
                                          2. that person—
                                            1. has the involvement solely by reason of being appointed as a proxy to vote at a meeting or meetings of members, or of a class of members, of another person; and
                                              1. has no discretion to determine how the proxy should be exercised at the meeting or meetings; or
                                              2. that person has the involvement by reason only that the person is a bare trustee of a trust to which the involvement or interest is subject; or
                                                1. that person is involved only because the ordinary business of the person consists of or includes the selling of core assets of an electricity business, and the person does not operate those assets; or
                                                  1. that person has the involvement only because the person is an adviser or industry service provider.

                                                    1. For the purposes of subclause (1)(f), a trustee may be a bare trustee despite the fact that he or she is entitled as a trustee to be remunerated from the income or property of the trust.

                                                    Compare
                                                    • 1988 No 234 s 6
                                                    • 1998 No 88 s 19
                                                    Notes
                                                    • Schedule 2 clause 4 heading: amended, on , by section 49(8) of the Electricity Industry Amendment Act 2022 (2022 No 46).
                                                    • Schedule 2 clause 4(1): amended, on , by section 49(9) of the Electricity Industry Amendment Act 2022 (2022 No 46).
                                                    • Schedule 2 clause 4(1)(a): amended, on , by section 49(10) of the Electricity Industry Amendment Act 2022 (2022 No 46).
                                                    • Schedule 2 clause 4(1)(c): replaced, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

                                                    5Meaning of control rights

                                                    1. For the purposes of this Act, a control right means a voting right attaching to a voting product.

                                                    2. A person has a control right if the person would have a relevant interest, under sections 235 to 238 of the Financial Markets Conduct Act 2013, in the voting products that confer that right,—

                                                    3. if voting product, in relation to a body, meant a financial product of the body that confers a right to vote at meetings of members (whether or not there is any restriction or limitation on the number of votes that may be cast by, or on behalf of, the holder of the financial product); and included a financial product that, in accordance with the terms of the financial product, is convertible into a financial product of that kind; and
                                                      1. if references in those sections to a number or percentage of voting products were references to the number or percentage of the votes conferred by those financial products.

                                                        1. In subclause (2), financial product has the same meaning as in section 7 of the Financial Markets Conduct Act 2013.

                                                        Compare
                                                        • 1998 No 88 s 9
                                                        Notes
                                                        • Schedule 2 clause 5(1): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
                                                        • Schedule 2 clause 5(2): replaced, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
                                                        • Schedule 2 clause 5(3): inserted, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).

                                                        6Meaning of equity return rights

                                                        1. For the purposes of this Act, a person has an equity return right in relation to a business if the person has a right or entitlement or expectancy to receive equity returns, directly or indirectly, of the business.

                                                        2. Equity returns means—

                                                        3. profits of the business; or
                                                          1. distributions from the business; or
                                                            1. other equity returns from the business, as defined in subclause (3).

                                                              1. Other equity returns—

                                                              2. means a benefit derived, directly or indirectly, from a business that represents or is calculated by reference to or is determined by,—
                                                                1. a share in or proportion of its capital; or
                                                                  1. its surplus or residual economic value (after satisfying prior contractual claims); or
                                                                    1. its profitability or other indicator of its success; but
                                                                    2. to avoid doubt, does not include a right or entitlement to interest on debt calculated at general market rates that prevail at the time of the loan agreement, or fluctuating in accordance with a formula which applies general market rates prevailing from time to time.

                                                                      1. A person is deemed to have a percentage of the equity return rights held by another person in a business if the first person has, or is 1 of 2 or more associates who together have, more than 10% of the equity return rights in the second person.

                                                                      2. The percentage of rights held by a person in another person is calculated as follows:

                                                                        a = b x c

                                                                        Where:

                                                                        • a a

                                                                          is the percentage to be determined

                                                                        • b b

                                                                          is the percentage of the equity return rights held by the first person in the second person

                                                                        • c c

                                                                          is the percentage of the equity return rights held by the second person in the business.

                                                                      Compare

                                                                      7Meaning of material influence

                                                                      1. Without limiting the ordinary meaning of the expression material influence, the following people are deemed to have material influence over a business:

                                                                      2. a director or manager of a person that carries on the business:
                                                                        1. if the business is carried on by a natural person, that person:
                                                                          1. a person in accordance with whose directions, instructions, or wishes a person referred to in either of paragraph (a) or (b), or the business, may be required or is accustomed to act in respect of the carrying on or management of the business:
                                                                            1. a person that exercises or that is entitled to exercise, or who controls or is entitled to control the exercise of, powers that would ordinarily be exercised by a person referred to in either paragraph (a) or (b):
                                                                              1. a person that can appoint or remove, or control the appointment or removal of, a person referred to in either paragraph (a) or (b):
                                                                                1. a person that has a power to influence a decision of the business that would ordinarily require the holding of control rights which would cause the person to exceed the 10% threshold:
                                                                                  1. a person in circumstances where the person and the business are acting, or proposing to act, jointly or in concert in relation to the business:
                                                                                    1. a person that, under a trust or agreement (whether or not the person is a party to it), may at any time have any of the powers referred to in paragraphs (c) to (f).

                                                                                      1. Where a person has material influence over a business under this clause, and another person has any of the powers or controls referred to in subclause (1)(c) to (h) in relation to the first person or the majority of its directors or managers, then that other person is deemed also to have material influence over the business, and so on.

                                                                                      2. A person is deemed to have material influence over a business if the person is 1 of 2 or more associates who, together, have material influence over the business.

                                                                                      3. Subclause (3) does not apply to deem a person to have material influence over a business only because that person is, under clause 8(1)(b), an associate of another person, provided those associates act in accordance with the Code provisions (if any) relating to arm’s-length rules (as defined in section 44C) in respect of the business.

                                                                                      4. To avoid doubt, a power to cast 1 of many votes at an election of trustees or councillors does not, of itself, constitute material influence.

                                                                                      Compare
                                                                                      Notes
                                                                                      • Schedule 2 clause 7(4): amended, on , by section 49(11) of the Electricity Industry Amendment Act 2022 (2022 No 46).

                                                                                      8Meaning of associate

                                                                                      1. For the purposes of this Act, person A is an associate of person B (and vice versa) if—

                                                                                      2. person A is a body corporate, and person B is—
                                                                                        1. a director of that body corporate; or
                                                                                          1. a related body corporate of that body corporate (within the meaning in section 12(2) of the Financial Markets Conduct Act 2013); or
                                                                                            1. a director of a related body corporate of that body corporate (within that same meaning); or
                                                                                            2. person A is a spouse, civil union partner, de facto partner, child, or parent of person B; or
                                                                                              1. person A is a partner, to whom the Partnership Law Act 2019 applies, of person B; or
                                                                                                1. person A is a limited partnership or an overseas limited partnership and person B is a general partner or a limited partner who takes part in the management of the limited partnership (within the meaning of the Limited Partnerships Act 2008); or
                                                                                                  1. person A is a nominee or trustee for person B in relation to interests in a business; or
                                                                                                    1. person A is a director of a company, or holds more than 10% of the control rights in the company, and person A and person B are parties to an agreement relating to—
                                                                                                      1. the control of that company; or
                                                                                                        1. more than 20% of the control rights in that company; or
                                                                                                        2. person A and person B are acting, or propose to act, or are likely to act, jointly or in concert in relation to a business; or
                                                                                                          1. person A is a person who, in making a decision or exercising a power materially affecting a business, is accustomed, or under an obligation, or proposes, or is likely, to act in accordance with the directions, instructions, or wishes of person B.

                                                                                                            1. References in subclause (1)(e) to (h) to a company or business relate to a company or business in respect of which a connection with a business is relevant.

                                                                                                            Compare
                                                                                                            Notes
                                                                                                            • Schedule 2 clause 8(1)(a)(ii): amended, on , by section 150 of the Financial Markets (Repeals and Amendments) Act 2013 (2013 No 70).
                                                                                                            • Schedule 2 clause 8(1)(c): amended, on , by section 86 of the Partnership Law Act 2019 (2019 No 53).

                                                                                                            9Substance matters, not form, for purposes of determining level of involvement

                                                                                                            1. Without limiting section 6A, a person may be involved in a business, or be an associate or agent, regardless of whether a right, influence, power, obligation, or agreement is—

                                                                                                            2. expressed or implied:
                                                                                                              1. direct or indirect:
                                                                                                                1. legally enforceable:
                                                                                                                  1. related to a particular control right:
                                                                                                                    1. subject to restraint or restriction or is capable of being made subject to restraint or restriction:
                                                                                                                      1. exercisable presently or in the future:
                                                                                                                        1. exercisable only on the fulfilment of a condition:
                                                                                                                          1. exercisable alone or jointly with another person or persons.

                                                                                                                            1. A power, influence, or ability exercisable jointly with another person or persons is deemed to be exercisable by either or any of those persons.

                                                                                                                            2. A reference to a power or obligation includes a reference to a power, influence, ability, or requirement that arises from, or is capable of being exercised or required as a result of, a breach of any trust or agreement whether or not it is legally enforceable.

                                                                                                                            Compare
                                                                                                                            Notes
                                                                                                                            • Schedule 2 clause 9(1): amended, on , by section 49(12) of the Electricity Industry Amendment Act 2022 (2022 No 46).

                                                                                                                            10Other interpretation rules

                                                                                                                            1. For the purposes of section 6A and this schedule, unless the context otherwise requires,—

                                                                                                                              agreement includes a deed, a contract, an agreement, an arrangement, and an understanding, whether oral or written, express or implied, and whether or not enforceable at law

                                                                                                                                expectancy means, in relation to a business or any other person,—

                                                                                                                                1. an expectancy or a contingent or unvested right to equity returns of the business or person; or
                                                                                                                                  1. a right to equity returns of the business or person which does not confer on the holder a certain or defined share of the equity returns available to all or to any class of persons having equity return rights in the business or person.

                                                                                                                                  Compare
                                                                                                                                  Notes
                                                                                                                                  • Schedule 2 clause 10 heading: replaced, on , by section 49(13) of the Electricity Industry Amendment Act 2022 (2022 No 46).
                                                                                                                                  • Schedule 2 clause 10: amended, on , by section 49(14)(a) of the Electricity Industry Amendment Act 2022 (2022 No 46).
                                                                                                                                  • Schedule 2 clause 10 manager: repealed, on , by section 49(14)(b) of the Electricity Industry Amendment Act 2022 (2022 No 46).

                                                                                                                                  11Exclusions, etc, are cumulative

                                                                                                                                  1. In relation to this schedule,—

                                                                                                                                  2. limitations, exclusions, or exemptions under any clause may be applied cumulatively; and
                                                                                                                                    1. references to an activity being carried out only or solely for a particular purpose or in a particular way, or to a person having an involvement or interest only or solely for a particular reason, must not be read as excluding reliance on any other limitation, exclusion, or exemption in any of those clauses.

                                                                                                                                      Compare