1. Introduction
What is the problem?
The expiry of section 62 is likely to affect those consumers on lines that are considered uneconomic, such as those to remote rural areas. If section 62 is repealed and the requirement for continuance of supply expires, lines companies would no longer be legally obliged to maintain connection.
Federated Farmers
The removal of the obligation risks telecommunications infrastructure (cell sites and the police radio network). Recent weather events have highlighted the reliance of such infrastructure on diesel generators owned by farmers but these are not always adequate. Such measures are not sustainable alternatives to supply by lines.
South Island High Country Federated Farmers
Many farmers made significant contributions to the construction of supply lines to their stations or communities and (perhaps reluctantly) accepted the 20 year sunset clause on the obligation to supply. A mitigating factor was the belief that by 2013 cost effective alternative supply options would be widely available, however no significant advances have been made.
Winston Oliver
Since reticulation, alternative energy use (such as coal ranges and kerosene fridges) has been replaced by electrical appliances. The loss of rural reticulation now would have a significant impact on the average farm.
The Lines Company
Acknowledge national benefit in maintaining secure supply to remote areas. Support Federated Farmers observations of unproductive time non-grid energy supply can consume, more productive for the nation if time spent on activities that add to GDP.
Counties Power
Issue of continuance of supply cannot be evaluated in isolation from the broader regulatory environment.
Collective submission - 18 lines companies
Should section 62 remain unchanged, it is possible that from 2013 electricity supplies may not be maintained in rural areas, where costs of supply significantly exceed the revenues associated with those assets. Cross-subsidy has the potential to become significant as assets initially built from RERC subsidies reach the end of their useful lives and require replacing.
Collective submission - 18 lines companies
Currently ELBs manage their networks in a manner which meets the needs of the communities they serve. Support solutions which recognise wider community responsibility for local infrastructure.
Electricity Networks Association
Concerns expressed by power boards in submissions on original bill in terms of delaying sensible arrangements, encouraging disputes, continuing maintenance over transition period have shown themselves to have some basis. ENA understands that no prior consents have been issued by the Minister of Energy or Consumers by formal agreement as anticipated in particular situations. Clearly this has not been an effective transitional mechanism.
Electricity Networks Association
In order to properly assess the number of consumers affected by expiry of section 62, there needs to be basic information on
- Appropriate ways of distinguishing "uneconomic" lines
- Number of currently "uneconomic" lines which could potentially not be maintained if there were no obligation
- Number of lines that may be "uneconomic" in the future
- Number of consumers serviced by those lines
- Geographic placement of those consumers
- Community and industry needs those lines served.
ENA is prepared to work further with officials and other stakeholders to help obtain this basic information and to consider its implications.
Powerco
A 'future proof' solution will as far as possible rely on the market to deliver affordable energy solutions but where the market is unable to deliver there will be a process to
- Define the social externality
- Quantify its value and subsidise it explicitly
- Allocate these subsidies transparently, predictably and in a non-distortionary manner.
- Have a "last resort" option for complete market failure.
Network Waitaki
This section might better ask "Is there a problem?"
When a storm event currently occurs line companies have an incentive via performance measures and price/quality thresholds to restore supply as quickly as possible. Having restored supply they will then take the time to analyse what is the optimum level of rebuilding and reinforcement that is warranted. This considers the affects on future performance and costs and is assessed against the network as a whole. The process can take several years and therefore no consumers are simply abandoned at the time of the storm event.
RERC subsidies were a matter of central government social policy. Line companies are not social service providers and are not accountable for the outcome of policy changes.
Consumers do face higher costs for maintaining their own service line assets now as they don't have a large asset base to average costs over. The assumption that line companies own the lines is not correct. Consumers own between 5 and 15% of the last part of their supply. In NWL's case about 10 % of these lines were subsidised by the RERC.
Note that the consumers (not the power company) paid the remainder of the cost of the lines built under RERC scheme. The RERC scheme required a consumption guarantee and was effectively the equivalent of a New Investment Contract with a fixed price and term. The term subsidy is also a bit of a misnomer, as consumers were actually paying the full cost via a mechanism that simply spread cost out over a number of years by applying a higher fixed charge component for those individual consumers.
Marlborough District Council
The spirit of the Civil Defence Emergency Act 2002 is clear for lifeline utilities to be maintained in rural areas "the economic viability of communities and of the nation as a whole depends on the continued operation of lifeline utilities". Many people completely unaware of the legislation – needs to be publicized to give people 5 years to prepare.
National Institutive of Water and Atmosphere (NIWA)
Very few consumers are likely to be isolated from the system until a large capital spend is required – timing of this is uncertain consequently supply duration is uncertain.
Objective of the review
The objective of the review is to consider what new arrangements 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.
Powerco
Suggest proposed outcomes are:
- All classes of consumer have their energy needs reliably serviced at an affordable price
- Investors in energy services are able to generate a commercial return on their investments
- Market solutions where possible and regulatory solutions only where necessary. Market failure (for example, social externalities) to be explicitly addressed using the least distortionary mechanisms available.
- A sustainable, low emissions energy future.
2 key differences between proposed approach and review objective are that Powerco's proposal recognises consumer energy needs can be met through a variety of different means rather than simply through the conventional approach to delivering electricity; and all classes of consumer have their energy needs reliably and affordably serviced.
National Institutive of Water and Atmosphere (NIWA)
To ensure that affected consumers continue to have access to energy services after 2013….Whether continuance of supply is interpreted as energy services or electricity will have considerable impact. Optimisation of the unit cost of a lines network is driven by maximising throughput, optimisation of the ultimately desired energy services are at least equally governed by maximising efficiency.
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