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Output Class > Policy Advice on Energy and Resource Issues

Description

This output class provides policy advice on the effective operation of energy and resource markets (electricity, oil, gas, geothermal, coal, minerals and other natural resources).

Quantity, Quality, Timeliness and Cost

Work Programme

All policy advice projects were delivered in accordance with the terms of the work programme as agreed with the Minister. Changes to deadlines were negotiated with the Minister.

The following outputs were included in this output class for 2004/2005.

Electricity

This output involves monitoring and advising the Government on effective governance and operation of the electricity market and implementation of regulations as required; in particular, ensuring that electricity industry arrangements and policy settings promote investment and retail competition and security of supply, focusing on the following.

Efficient management of security of supply, including dry-year risk.

The Whirinaki Power Station was commissioned in July 2004, with the security of supply responsibilities successfully transferred to the Electricity Commission (EC). A Reserve Generation Capacity Agreement for Whirinaki Power Station has been executed with the Ministry of Economic Development maintaining ownership responsibility and continuing to provide input to the EC on Whirinaki operational activities.

Work by the EC suggests that current plans for new generating plant are sufficient to meet needs in 2005, that 2006 will be slightly tighter, and that the new gas-fuelled Huntly e3p station due to be available for 2007 will add significantly to security of supply for two or more years from that date.

Effective wholesale and retail competition and effective governance of the electricity sector.

Ministry of Economic Development officials provided ongoing advice in relation to the EC's work on the operation of the electricity market under the Electricity Governance Rules and Regulations. In particular, advice was provided on proposed rule changes.

Efficient line services (including transmission security and efficient prices).

Officials continued to work closely with the EC and Transpower on a number of significant transmission issues, including the proposed upgrade of the transmission line between South Waikato and Auckland, and the development of a transmission pricing methodology.

Gas, Oil and Other Resources

This output involves monitoring and advising the Government on effective operation of the gas and oil markets, including fuel quality and implementation of regulations as required. The output also involves advice on the allocation and management of natural resources, particularly Crown-owned resources, and Treaty of Waitangi claims in respect of natural resources; in particular, ensuring that gas industry governance and market arrangements are implemented by market participants to promote a smooth transition to the post-Maui environment, focusing on the following:

• security of supply in the gas sector;
• effective governance of the gas sector;
• effective wholesale market arrangements;
• open access to the Maui pipeline; and
• improving the regulatory environment on gas pipelines.

Incentives for gas exploration have been implemented. The Gas Industry Company (GIC), as the industry body, has implemented a comprehensive work plan and begun to make recommendations to the Minister of Energy on industry arrangements. Officials are guiding industry in the development of an open access regime for the Maui pipeline.

Energy and the Environment

This output involves contributing to policy advice on the development of a response to New Zealand's climate change obligations under the Kyoto Protocol, monitoring and providing advice on plans and policies under the Resource Management Act 1991 (RMA), and contributing to the development of the Sustainable Development Programme of Action for freshwater. In 2004/2005 the output included the following.

Participating actively in the inter-departmental process relating to the development of the Sustainable Development Programme of Action for freshwater.

The Ministry has actively participated in the inter-departmental process for the Sustainable Development Programme of Action for Freshwater. This process resulted in the release (on 9 December 2004) of Freshwater for a Sustainable Future: Issues and Options - a public discussion paper on the management of New Zealand's freshwater resources. Officials are due to report back in December 2005 on the next stages of this programme.

Participating actively in the development of advice on the domestic climate change policy package, as coordinated by the Ministry for the Environment Climate Change Office.

The Ministry has actively participated in the inter-departmental process for climate change policy. Updated (provisional) projections of energy sector greenhouse gas emissions were provided for the Ministry for the Environment's annual report on climate change policy and New Zealand's net position. The Ministry also supported the passage of the Climate Change Response Amendment Bill through Select Committee stage.

Monitoring and advising on policies and plans under the RMA with respect to their potential impact on significant energy developments, infrastructure and renewable energy sources.

The Ministry of Economic Development provided submissions under the RMA in support of several electricity generation proposals. The Ministry is continuing its engagement in the appeal to the Environment Court of the Environment Waikato geothermal plan.

Sustainable Development Plan of Action for Energy

This output involves leading the inter-departmental process relating to the development of the Sustainable Development Programme of Action on energy, in particular:

Development of a framework for energy policy over the medium to long term.

A Sustainable Energy document was released in October 2004, with stakeholder workshops held in February/March 2005. A paper on the next phase of the sustainable energy work programme was submitted to Cabinet on 11 July 2005.

Crown Entity Monitoring

Advice was provided to the Minister on one statutory appointment to the Electricity Commission board. The appointment was delayed due to the General Election.

Monitoring and reporting to the Minister on the financial and non-financial performance of the Electricity Commission was provided as reflected through:

• the Statement of Intent;
• the Output Plan; and
• management reports (for reference, as appropriate, to the Minister).

Cost

(Figures are GST exclusive)

Major Budget Variances

The Supplementary Estimates increase mainly reflected a transfer from Energy and Resource Information Services to meet cost pressures ($480,000), a transfer from Administration of Gas and Electricity Regulations to meet cost pressures ($50,000), and a transfer from 2003/2004 reflecting delays in the Bioprospecting project ($25,000), partially offset by a technical adjustment for sub-leased space.

The variance between 2004/2005 and 2003/2004 actual expenses is mainly due to one-off expenditure for the establishment of an Electricity Governance Board (now the Electricity Commission), one-off expenditure to enhance security of the electricity supply for 2004, and for policy work on the purchase of a reserve electricity generation plant in 2003/2004.

Output Class > Management of the Crown Mineral Estate

Description

This output class provides services relating to the management of Crown-owned minerals under the Crown Minerals Act 1991 and minerals programmes issued under this Act.

The Crown owns all in-ground petroleum, gold and silver in New Zealand and approximately half of the coal and other mineral resources. It also has jurisdiction of the petroleum and minerals in New Zealand's exclusive economic zone and continental shelf.

Quantity, Quality, Timeliness and Cost

(Performance standards for outputs other than policy advice are in brackets where applicable.)

Work Programme

All policy advice projects were delivered in accordance with the terms of the work programme as agreed with the Minister. Changes to deadlines were negotiated with the Minister.

The following outputs were included in this output class for 2004/2005.

Petroleum and Minerals Policy

This output provides operational policy advice on the management of the Crown mineral estate, including preparation and review of minerals programmes and regulations prescribed under the Crown Minerals Act 1991. The 2004/2005 work programme included the following.

Operational policy and strategic advice on the petroleum and minerals sector.

In 2004/2005, operational policy advice included advice on amendments to the tax regime to promote exploration (led by the Inland Revenue Department and Treasury).

Completing and publishing the Petroleum Minerals Programme 2005.

The Petroleum Minerals Programme 2005 (including amendments to the royalties regime to promote exploration) was published on 1 January 2005.

Petroleum and Minerals Investment

This output involves activity to secure appropriate international and domestic sourced investment, to enable the Crown's petroleum and mineral assets to contribute to the economic development of New Zealand. The output includes exploring partnership opportunities with domestic and international organisations to attract explorers to New Zealand; identifying and pursuing overseas organisations likely to invest in exploration and mining, especially with regard to oil and gas; ensuring that both financial and geo-technical data is readily accessible to potential explorers; and ongoing assessment of the success of investment strategies. In 2004/2005 the output included the following.

Provision of strategic investment advice for ensuring New Zealand's business regime is internationally competitive.

Fortnightly reports were provided to the Associate Minister of Energy throughout the year. Six-monthly briefings were provided to the Minister and Associate Minister of Energy.

An investment strategy and marketing plans for minerals and coal.

Petroleum and minerals investment strategies and marketing plans were completed during the year.

Implementation of the strategies set out in the marketing plans for petroleum and minerals.

Implementation was ongoing through 2004/2005. Visits to North America to promote petroleum investment in New Zealand were undertaken in September 2004 and March 2005.

Ongoing monitoring of the effectiveness of these strategies and policies and reviewing all plans against marketing objectives.

A review of the marketing plans was conducted in February 2005.

Implementing a customer research and management system.

A new database for managing prospective explorers' records was implemented on 21 July 2004.

Exploration and Mining Services

Quantity

Permit applications processed:

• 193 (165) permit applications; and
• 236 (220) permit change applications.

The increase in the numbers of permit and permit change applications processed was due to high international commodity prices and increased exploration activity.

Estimated Crown revenue collected:

• Royalties - $55.1 ($32.7) million; and
• Energy resource levies - $72.7 ($77.4) million.

Royalties collected were higher than forecast due to higher oil prices reflecting on petroleum production royalties.

The lower than forecast revenue from Energy Resource Levies was caused by reduced gas volumes due to the decline of the Maui field.

Management of the geoscience resource data library:

An estimated 312 (170) records and reports received from petroleum and minerals holders were entered into the resource data library.

Increased exploration activity during the year, due to factors such as high international commodity prices, resulted in more records and reports being lodged with higher than forecast data entries into the resource data library.

Quality

Petroleum and mineral permits (including licences) were monitored for compliance with work programme conditions to ensure the integrity of the allocation system by:

• reviewing all (all) petroleum and mineral permits against permit work statements; and
• conducting on-site field inspections on:
  • 31 (30) mineral mining permits; and
  • 24 (15) mineral prospecting and exploration permits.

Petroleum and mineral permit holders were notified in writing of any non-compliance with work programme conditions within 10 working days of the non-compliance activity being identified.

Fifteen (a minimum of 10) compliance audits of energy resource levy or royalty payers were undertaken within five months of receipt of annual royalty or levy.

Timeliness

• 100% (90%) of new permit applications that were priority one¹² (including changes to area, minerals and duration) were processed within four (six) months of receipt.
• 89% (90%) of client enquiries and data information requests were actioned and completed within ten working days of receipt.
• 91% (95%) of royalties were collected within one (one) month of due date.
• 94% (90%) of fees were collected within two (two) months of due date.

Cost

(Figures are GST exclusive)

Major Budget Variances

The Supplementary Estimates increase mainly reflected additional funding for the management and administration of increased activity within the Crown Mineral estate, partially offset by a technical adjustment for sub-leased space.

The variance between the Supplementary Estimates and actual Revenue Other reflects increased activity in the exploration and mining sector.

The variance between 2004/2005 and 2003/2004 actual expenses reflects the increase in initiatives to attract exploration investment in New Zealand.

Output Class > Administration of Gas and Electricity Regulations

Description

This output class provides advice on the administration of gas and electricity safety and associated policy work, and administers regimes on supply, quality and measurement for gas and electricity safety; petroleum quality monitoring; electrical worker licensing; and information disclosure for the gas industry.

Quantity, Quality, Timeliness and Cost

(Performance standards are in brackets where applicable.)

Energy Safety Advice

This output provides for advice on energy safety issues associated with the safe supply and use of gas and electricity. Projects for 2004/2005 included:

Provide support for the passage of the Energy Safety Review Bill in accordance with the legislative timetable and prepare regulation amendments required to support the EnergySafe programme.

The Energy Safety Review Bill was introduced to the House on 1 June 2005 and has been referred to the Commerce Select Committee.

Review and amend the Electricity Regulations 1997 as required to reflect the development of standards and new technology.

Work has commenced on a major review of the Electricity Regulations 1997 that will both update the regulations, for example, with respect to references to new standards and codes, and amend the regulations to reflect changes to the legislation arising from the Energy Safety Review Bill.

Quality

Generic quality performance measures for policy advice, Ministerial services and briefings as detailed in the Ministry of Economic Development's Quality Standards for Policy Advice and Ministerial Servicing applied to this output.

Energy Safety Enforcement and Conformance

This output provides for operating an effective investigation, compliance, enforcement and communication regime for gas and electricity safety, including reviewing and implementing changes in legislation, regulations and standards.

Quantity

87 (80) audits of networks and distribution systems, and installations and appliances were undertaken.

A higher number of serious injuries in the year resulted in the number of reactive audits of safety and compliance being higher than expected.

60 (30) significant gas and electricity accidents and incidents, where there was serious injury or loss as defined in section 16 of the Electricity Act 1992 and section 17 of the Gas Act 1992,¹³ were investigated.

Actual incidents of a serious nature were significantly higher than forecast. While investigation is discretionary, the higher number was done in the interests of public safety.

Quality

Electrical and gas safety representative organisations surveyed rated, on average, that they were (3) satisfied to (4) very satisfied with the Energy Safety Service's performance, as evidenced by an annual survey.¹⁴

Timeliness

80% (90%) of audit and inspection reports were completed within 30 working days of the audit or inspection. Reports that were late were primarily due to the increase in the number of serious harm or loss incidents.

92% (90%) of accident investigations were responded to and action commenced within 24 hours of notification of the accident.

Petroleum Monitoring

Quantity

The Ministry oversaw the testing of a minimum of 99 (90) sample sets¹⁵ in accordance with a statistically-based sampling plan to meet the requirements of the Petroleum Products Specifications Regulations 2002.

The number of sample sets undertaken was required to meet the criteria of a statistically valid sampling model.

Quality

All testing laboratory reports on petroleum quality were reviewed monthly to ensure that appropriate action had been taken on the test results and report recommendations.

Timeliness

100% (95%) of analysis of results from petroleum testing laboratories and recommendations were completed within 15 working days from receipt of reports.

Electrical Workers Licensing

Quantity

1,994 (1,000) electrical workers' registrations were actioned.

21,526 (20,500) practising licenses were issued.

5,500 (5,000) telephone competency audits of registered electrical workers who had not uplifted a practising licence were conducted.

204 (200) competency audits of electrical workers who held a provisional licence and/or were supervised trainees were conducted.

Electrical workers' registrations are demand driven. The increase in 2004/2005 is due to an increase in the number of New Zealand trained people completing their National Certificates as well as an increase in the number of overseas trained people obtaining registration.

Quality

All (all) decisions by the Registrar that were referred to the Electrical Workers Registration Board complied with the Electricity Act 1992, the Electricity Regulations 1997 and published policies.

Timeliness

Licensing and Registrations:

• 100% (95%) of correctly completed practice licensing applications were processed within 10 clear business days of receipt;
• 100% (95%) of correctly completed registration applications (New Zealand based trainees) were processed within 10 clear business days of receipt; and
• 61% (65%) of correctly completed overseas registration applications were processed within 10 clear business days of receipt.

The standard relating to overseas registration applications was not met because of the demands of meeting the licence renewal round this year.

Complaints:

• 92% (95%) of complaints against registered electrical workers were processed to notification of the Complaints Assessment Committee decision (subject to external parties, e.g. legal intervention) within 25 weeks.
  The standard was not met because of a small percentage of cases being adjourned or not being able to be heard. There has, however, been a significant increase in the number of complaints received (94 in 2004/2005 compared with 66 in 2003/2004) due to increased public awareness.
• 63% (95%) of complaints against registered electrical workers were processed to notification of the Board's decision (subject to external parties, e.g. legal intervention) within 25 weeks.
  The standard was not met because of adjournments. However, the Electrical Workers Registration Board has heard the largest number of cases since its inception (51). Improved processes were introduced and an additional nine days of hearings were held, compared to the previous year.

Information Disclosure

Quantity and Timeliness

Annual compliance checks of all gas information disclosures were undertaken, with 80% of checks completed within 60 working days of their receipt by the Ministry.

Any cases of non-compliance will be followed up with the companies concerned within 30 working days of the non-compliance being detected, with the aim of achieving full compliance within 120 working days of the detection. (Note in some cases it is possible that prosecution could be required in order to achieve full compliance and, as a result, there could be a considerable delay before full compliance is achieved.)

No follow up was required.

Quality

All financial information disclosures were accompanied by an audit certificate.

All information disclosures were accompanied by a declaration form completed by a Director of the company concerned.

All information entered into the Ministry database was subject to validation checks for accuracy and completeness.

Cost

(Figures are GST exclusive)

Major Budget Variances

The Supplementary Estimates changes mainly reflected a transfer to Vote: Communications - Policy Advice Communications to meet cost pressures (-$80,000), a transfer to Vote: Energy - Policy Advice on Energy and Resource Issues to meet cost pressures (-$50,000), delays in LPG levy legislation (-$122,000), delays in the Energy Safety Review Bill (-$25,000) and a delay in the Energy Safety Service website maintenance project (-$64,000).

Output Class > Provision of Climate Change Unit Register and Information

Description

This output class provides services relating to the development, implementation and operation of a register to enable the allocation and trading of climate change units under the Climate Change Response Act 2002. This Act was passed in order to meet New Zealand's obligations under the Kyoto Protocol. Current indications are that the register may be required for international audit in 2006, and international trading will start once the Protocol comes into force, which is expected to be 1 January 2008.

Quantity, Quality, Timeliness and Cost

The work programme, which was delivered as agreed with the Minister, included:

Preparation of the detailed business requirements specifications for development of a New Zealand national unit register.

Detailed business requirements specifications have not been completed because more extensive evaluations were undertaken than originally anticipated. It is now expected that detailed user requirements will be completed by the end of February 2006.

Preparation of a business case and project budget for the Minister's approval.

A Cabinet paper confirming the budget for the project was submitted in July 2005.

(Preparation of the detailed business requirements specification was dependent on the United Nations Framework Convention on Climate Change (UNFCCC) completing their technical documentation on national register requirements.)

Quality and Timeliness

The detailed business specifications will be prepared in accordance with the Ministry of Economic Development standards and practices for information technology projects, with delivery and reporting against agreed milestones. This work will also need to comply with the international requirements for national registers as specified by the UNFCCC in their technical documentation.

Work was still under way at 30 June 2005, due to delays in completing detailed business specifications for the New Zealand national unit register caused by the UNFCCC delaying provision of technical specifications for data exchange.

Cost

(Figures are GST exclusive)

Major Budget Variances

The Supplementary Estimates increase reflected a transfer from 2003/2004 arising from timing issues around the development of business requirements for a New Zealand National Unit Register.

The variance between Supplementary Estimates and actual expenses is due to delays in completing detailed business specifications for the New Zealand Register, resulting from the UNFCCC delaying provision of technical specifications for data exchange.

The variance between 2004/2005 and 2003/2004 for actual expenses reflects the timing of progressing developing the business requirements for the New Zealand register, which is dependent on the UNFCCC completing their documentation for the data exchange standards.

Output Class > Energy and Resource Information Services

Description

This output class covers the provision of information and technical advice on energy and resources, the management of the response to any international disruption in oil supplies, and the management of New Zealand's energy-related international relationships.

Quantity, Quality, Timeliness and Cost

Outputs in this output class in 2004/2005 included the following:

Updating and publishing Energy Data files, the Energy Sector Greenhouse Gas Inventory Report, and the Energy Outlook.

Two Energy Data files were published during the year, on 16 September 2004 and on 6 April 2005.

The annual inventory of energy sector greenhouse gas emissions was completed during the year and published in early July 2005.

Publication of the Energy Outlook was deferred to 2006 with the agreement of the Minister.

Updating and publishing crude oil, petrol and diesel prices.

The Ministry of Economic Development's website was updated weekly, with the exception being the month of November 2004 when international prices were unavailable.

Managing New Zealand's response to any international disruption to oil supplies.

In March 2005, Cabinet agreed that New Zealand should maintain its membership of the International Energy Agency and meet the 90 days reserve obligation by tendering for oil stocks. The cost of the tenders will be met by an increase in the petroleum fuels monitoring levy and tenders will be administered by the Ministry of Economic Development. The Ministry consulted with interested parties on tender design and reported back to Cabinet in July 2005 for consideration of implementation details. Current expectations are that the first tenders will be held in early 2006.

Managing New Zealand's international energy relationships.

Managing New Zealand's energy international relations during 2004/2005 included:

• involvement with the International Energy Agency (IEA), including responses to requests for information/statistics and representation at IEA meetings;
• relations with the APEC Energy Working Group (EWG) including representing New Zealand at EWG meetings in November 2004 and March 2005;
• representing New Zealand business at an EWG Energy Business Network meeting in November 2004; and
• maintaining a watching brief on the activities of Australian Ministerial Councils.

Timeliness

All publications and briefings will be produced to deadlines specified in the Ministry of Economic Development Output Plan.

There were some small delays due to data sourcing taking longer than expected.

Quality

Generic quality performance measures for policy advice, Ministerial services and briefings as detailed in the Ministry of Economic Development's Quality Standards for Policy Advice and Ministerial Servicing applied to this output class.

All material produced for publication was reviewed for completeness and accuracy prior to publication, in accordance with internal systems and procedures and, where relevant, international requirements.

Cost

(Figures are GST exclusive)

Major Budget Variances

The Supplementary Estimates decrease mainly reflected a transfer to Policy Advice on Energy and Resource Issues to meet cost pressures (-$480,000) and a transfer to Policy Advice on Climate Change Initiatives in Vote: Climate Change and Energy Efficiency (-$150,000).

The variance between the Supplementary Estimates and Actual Revenue Other mainly reflects increased Petroleum Fuels Monitoring Levies (based on sales of petroleum fuels) collected from the five major oil companies for work associated with monitoring and related services in the industries to which the levies relate and matters that are incidental thereto (including the New Zealand Government's involvement with the International Energy Agency).