1. Introduction
1. In March 2005 the Ministry of Economic Development (the Ministry) released a discussion paper entitled Facilitating Investment in Generation by Lines Companies: A Discussion Note.
2. The purpose of that note was to open up a discussion on how lines companies' investment in generation can be facilitated (short of completely removing current ownership restrictions). Industry views were sought on a specific proposal to amend the legislation to allow lines companies to trade in hedge and spot energy markets up to the nominal capacity of their generating plant.
3. As part of the consultation process, several other options have been suggested. Specifically, there were proposals aimed at further relaxation of some aspects of the Electricity Industry Reform Act 1998 (EIRA), with some suggesting that without a complete overhaul of the Act effective participation of the lines businesses in the electricity generation market would not be possible.
4. The Ministry has considered the industry suggestions and possible options on how the effects of unnecessary barriers to lines companies' investment in generation could be minimised. The primary purpose of this discussion paper is to promote a further discussion with the industry on the issues of lines and energy separation.
5. This discussion paper firstly sets out the current regulatory settings and the policy rationale underpinning those. The next sections outline the perceived legislative barriers and options for addressing those. The last sections of this paper present the Ministry's analysis, draw some conclusions and invite industry comment.
6. The Ministry's response to requests for clarification or further detail of the proposal to allow lines companies to trade in hedge and spot energy markets up to the specified limits, as raised in the previous submissions, is provided in Appendix 1 to this paper. The list of submitters is included as Appendix 2
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