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Commerce Act 1986

Regulated goods or services - Default/customised price-quality regulation - Default price-quality path

53P: Resetting starting prices, rates of change, and quality standards

You could also call this:

"The law says the Commission must update important numbers like prices and standards before a new regulatory period starts."

Illustration for Commerce Act 1986

The Commission has to change some important numbers before a new regulatory period starts. You need to know what these numbers are: starting prices, rates of change, and quality standards. The Commission must look at the section 52P determination and update it with new numbers for the next period.

When the Commission resets these numbers, it has to talk to people who are interested. The starting prices can be either the same as the last period or new prices based on how much money suppliers are making. If the Commission sets new prices based on profitability, it must make sure suppliers are not trying to get back money they made unfairly in the past.

The Commission sets a rate of change for goods or services, like 1% for all similar goods. This rate is based on how well suppliers in New Zealand and other countries are doing. The Commission can think about how inflation affects suppliers when setting this rate. It can also set different rates for some suppliers to help them or to stop big price changes.

If the Commission does not set new numbers by the end of a period, the old numbers keep being used until the new ones are set. The Commission cannot use some methods to compare suppliers and set these numbers.

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This page was last updated on

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1685621.

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Previous

53O: Section 52P determination to set out requirements of default price-quality paths, or

"Rules for setting prices and quality standards for certain goods and services"

Next

53Q: Supplier may propose customised price-quality path, or

"Suppliers can ask to set their own prices and quality standards instead of using the standard ones."

Part 4Regulated goods or services
Default/customised price-quality regulation: Default price-quality path

53PResetting starting prices, rates of change, and quality standards

  1. Before the end of the first and every subsequent regulatory period, the Commission must amend the section 52P determination by setting out the starting prices (as referred to in section 53O(a)), rates of change (as referred to in section 53O(b)), and quality standards (as referred to in section 53O(c)) that apply for the following regulatory period.

  2. In resetting starting prices, rates of change, and quality standards, the Commission must consult with interested parties.

  3. The starting prices must be either—

  4. the prices that applied at the end of the preceding regulatory period; or
    1. prices, determined by the Commission, that are based on the current and projected profitability of each supplier.

      1. Starting prices set in accordance with subsection (3)(b) must not seek to recover any excessive profits made during any earlier period.

      2. Subject to subsection (8), the Commission must set only 1 rate of change per type of regulated goods or services (for example, if the rate of change (x) is 1% in a CPI−x path, 1% must be the rate for all goods or services of that type).

      3. The rate of change must be based on the long-run average productivity improvement rate achieved by either or both of suppliers in New Zealand, and suppliers in other comparable countries, of the relevant goods or services, using whatever measures of productivity the Commission considers appropriate.

      4. When setting the rate of change, the Commission may take into account the effects of inflation on the inputs of suppliers of the relevant goods or services.

      5. The Commission may set alternative rates of change for a particular supplier—

      6. as an alternative, in whole or in part, to the starting prices set under subsection (3)(b) if, in the Commission's opinion, this is necessary or desirable to minimise any undue financial hardship to the supplier or to minimise price shock to consumers; or
        1. as an incentive (under section 53M(2)) for the supplier to improve its quality of supply.

          1. Any alternative rates of change set under subsection (8) may include step changes.

          2. The Commission may not, for the purposes of this section, use comparative benchmarking on efficiency in order to set starting prices, rates of change, quality standards, or incentives to improve quality of supply.

          3. If starting prices, rates of change, and quality standards have not been set by way of an amendment to the relevant section 52P determination by the end of the regulatory period to which it applies, the starting prices, rates of change, and quality standards that apply at the end of the regulatory period continue to apply until the reset starting prices, rates of change, and quality standards are set.

          Notes
          • Section 53P: inserted, on , by section 4 of the Commerce Amendment Act 2008 (2008 No 70).