1. Introduction
1.1 What does section 62 "continuance of supply" mean?
1. Section 62 of the Electricity Act 1992 (the Act) provides that lines companies are to continue to supply line function services to places supplied as at 1 April 1993, unless certain circumstances apply. These circumstances include overdue payment for the line services, storm damage to the line, and servicing of the line for safety. In all circumstances the disruption to supply can only last as long as the circumstance lasts; e.g. following storm damage the obligation requires the line service to be resumed.
2. This provision remains in place until 2013. Subsection 6 of section 62 states that the section expires on 31 March 2013 and, as of 1 April 2013, will be deemed to be repealed.
3. Section 62 of the Act does not apply to consumers who connected to lines after 1993. We would expect the terms and conditions for continuance of their supply to be part of a connection contract.
4. Section 7 of this paper briefly describes how section 62 of the Act came to be enacted. Its full text is provided in Appendix 1.
1.2 What is the problem?
5. Stakeholders most likely to be affected by the expiry of section 62 are those consumers on lines that are considered uneconomic, such as those to remote rural areas. Many of these consumers are uncertain about arrangements for their electricity supply after 2013, such as what would happen to supply after a storm has damaged the lines. If section 62 is repealed and the requirement for continuance of supply expires, lines companies would no longer be legally obliged to maintain connection.
6. Consumers might need to arrange their own method of electricity supply by alternative sources and could face higher energy costs, and ongoing requirements in terms of maintenance of systems, managing quality and responding to failure. The number of consumers affected by the expiry of section 62 of the Act depends on the intentions of individual lines companies. We do not have a detailed picture of these consumers or their total number, but we know that by 1985 around 16,000 connections were made in remote rural regions using approximately 17,000km of line under a subsidy scheme administered by the Rural Electricity Reticulation Council.
7. Lines companies are likely to initially continue to supply after 2013 on lines considered uneconomic, but when maintenance or upgrade costs become too high, or lines fail after a storm, there is a possibility that lines may not be repaired or replaced. In order to maintain line service, consumers could be required to contribute to the repair / replacement costs.
8. In June 2005, the Minister of Energy announced that a review of section 62 of the Act would take place in 2007. Carrying out the review in 2007, well before the section expires, allows sufficient time for legislation to be amended (if considered necessary) and time for people to adjust any new regime.
1.3 Objective of the review
9. The objective of the review is to consider what new arrangements, if any, should be put in place to ensure that affected consumers continue to have proper access to an electricity supply that is efficient, fair and reliable and delivered in an environmentally sustainable manner.
10. A number of options identified as possible new arrangements are outlined in this paper, along with an indication of each option's potential impacts on different stakeholder groups. The paper raises a number of questions for consideration. It seeks views on options and impacts and invites suggestions of any additional options/impacts that should be considered.
11. The impact of each of the options is presented from the perspective of different stakeholder groups. These groups are identified as:
- Consumers supplied by lines that would be uneconomic to maintain and / or replace if damaged or worn out. They are most likely to be located in remote rural areas;
- Consumers whose line charges contribute to any implicit or explicit subsidy of lines charges (mainly urban consumers);
- Lines companies that own the lines (there are 28 such companies);
- "The Market", being those individuals or businesses that could potentially compete or partner with lines companies for supplying energy to consumers in remote rural areas.
12. The key assumptions are outlined prior to the presentation of options.
1.3.1 Supporting information
13. Section 6, section 7, appendix 1, and appendix 2 contain information on:
- the indicative costs of alternative electricity supply i.e. supplying electricity by methods other than by lines;
- historical background to why section 62 was enacted and the role of the Rural Electrical Reticulation Council (RERC) in subsidising the building of uneconomic lines to farming regions;
- the text of section 62 of the Electricity Act 1992;
- the Terms of Reference (ToR) for the review.
1.4 Process
1.4.1 Consultation
14. The purpose of this discussion document is to highlight the implications of the expiry of section 62 in March 2013 for connections made before 1993, identify a range of feasible options that could address the problem of uncertainty of supply beyond 2013, and indicate the impacts arising from each option. This paper does not recommend a specific option and requests feedback from submitters as to which option, or any other option not considered here, best addresses the review's objective.
15. The Ministry of Economic Development (MED) confirms that the substantive Regulatory Impact Analysis elements are included at the appropriate level in the discussion document, up to the level of impacts of options. The approach complies with the Code of Good Regulatory Practice. A preferred option is not yet identified.
16. Once we have received and considered your submission, these options (including any additional options identified through consultation) will be further analysed for their impacts before we finalise our recommendations to Ministers. Further cost-benefit analysis may be undertaken following analysis of submissions in order to inform the policy proposals.
17. The Ministry of Economic Development will make recommendations to the Minister of Energy on future arrangements and any proposed changes to section 62 of the Act by the end of 2007.
1.4.2 Submissions
18. Submissions are due by 5pm, Friday 28 September. The Ministry requests that submissions are made in writing (either by email, post or fax), or by filling in the online submissions form:
Email: electricity@med.govt.nz.
Post:
2013 review
Electricity Group
Energy and Communications Branch
Ministry of Economic Development
PO Box 1473
Wellington
New Zealand
Fax: +64 4 473 7010
Online: Using the online submission form.
19. The Ministry intends to publish the submissions on its website.
20. Respondents should note that written submissions or comments provided to the Ministry of Economic Development on the discussion paper will be subject to the Official Information Act 1982 (OIA). The OIA requires the information to be made available unless there is good reason, pursuant to that Act, to withhold the information; and that this good reason outweighs the public interest in making the information available. The Ministry will consider that you to have consented to publishing when you make a submission, unless you clearly specify otherwise, with reasons.
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