The Commerce Commission sets price thresholds in its regulatory regime. In early September it declared its intention for the first time to control an energy network company, saying Unison’s electricity distribution business had breached regulatory thresholds.

The commission assessed Unison’s return on investment for the year ended March 2006 to be as high as 12.23%, compared to the required rate of return of 7.35%. It estimated Unison’s rates of return were between 8.25% and 17.36%, varying between different regions.

Unison denied making excessive returns, saying those levels were needed for reinvestment in maintenance and improvements to its networks.

But the High Court concluded there was no sound basis for Unison's criticisms. Justice Wild said the approach favoured by Unison would be more intrusive and could create incentives that were inconsistent with the Commerce Act.

The High Court was "squarely against" Unison's argument that the commission could not adopt a forward-looking inquiry into Unison's proposed future pricing, Commerce Commission chair Paula Rebstock said.

“The court has made very clear that the thresholds regime for electricity distribution businesses is robust and that the commission’s approach is consistent with the purpose of the Commerce Act,” Rebstock said.

“The Commission is hopeful the industry will now take note of the court’s findings that the regime is consistent with the Act, and that there is a strong public interest in the regime being implemented.

“The Commerce Commission will continue to ensure all large electricity lines companies are subject to the scrutiny and oversight that Parliament intended when the regime was introduced.”

The commission's court victory is timely, with national grid owner-operator Transpower’s just-announced proposal to increase charges by 19% from next April an effective challenge to the commission's authority.