Electricity Industry Bill Passed

(PR.co.nz) Energy and Resources Minister Gerry Brownlee has welcomed the passage of the Electricity Industry Bill through Parliament today, saying it paves the way for necessary improvement in the electricity sector.

“The passage of this legislation through its final Parliamentary stages is an important step in the reform of the electricity market so that it better meets the needs of all New Zealand consumers,” Mr Brownlee said.

The Bill implements the final decisions following the 2009 Ministerial review of the sector. It is focussed on improving competition in the industry, promoting reliability of electricity supply and improving governance in the sector through the establishment of the Electricity Authority.

“When this government took office there was widespread dissatisfaction with the performance of the electricity sector. Prices had risen relentlessly for the previous decade, especially for residential consumers.

“Consumers had been asked several times to save power because of the lack of incentives in the market for generators to manage their own risk.”

Mr Brownlee said the government’s moves to increase competition in the sector had already led to a noticeable increase in retail competition.

“State owned electricity companies have been compelled to compete nation-wide.

“Tekapo A and B power stations are being transferred from Meridian to Genesis and we’re requiring virtual asset swaps between all three SOEs via long-term hedge contracts,” Mr Brownlee said.

The legislation paves the way for other changes to improve competition including:

* Letting lines businesses back into retailing (subject to strict controls)

* Setting up a liquid hedge market so that generators and retailers, especially new entrants, and businesses generally, can better manage volatile spot prices

* Reducing barriers to retail entry by reducing the complexity of line tariffs, and

* Setting up a fund to encourage consumers to shop around.

The legislation also introduces measures to improve security of electricity supply.

Mr Brownlee said stronger incentives will be placed on the industry to better manage security of supply, particularly in dry years: “Our aim is to make public conservation campaigns a last resort, not a first resort.”

The measures include getting rid of the reserve energy scheme put in place in 2003 and ensuring that the Whirinaki power station is operated commercially.

The Bill also requires retailers to compensate consumers when public conservation campaigns are put in place and it enables a floor to be put on spot prices during campaigns and other supply emergencies.

The legislation improves governance arrangements in the electricity sector by replacing the Electricity Commission with an independent Electricity Authority focussed on enforcing and developing electricity market rules, and contracting for key market operation services.

Some functions previously carried out by the Commission have been transferred to other agencies: promotion of energy efficiency has moved to EECA, approval of grid upgrade proposals to the Commerce Commission and management of supply emergencies to Transpower.

“I am confident this Bill will deliver a more competitive, more responsive and more responsible electricity sector. That said I cannot promise lower prices.

“There are a number of upward pressures on electricity costs, particularly the need to build new power stations and transmission and distribution lines. But I can give assurances that this Bill will put more competitive pressure on costs and prices in the industry and it will improve incentives for managing security of supply,” Mr Brownlee said.

Media Release 23 September 2010 from Gerry Brownlee, Minister of Energy and Resources.