Part Three: 2002 to …
58. January 2002: Establishment of Electricity Complaints Commission
At the Government's request an Electricity Complaints Commission [external link] has been organised to provide electricity consumers with assistance in resolving complaints about electricity lines or retail companies. The Commission is funded by member companies but remains independent of the industry. The Commission does not charge complainants for any assistance provided. The scheme was rebranded and relaunched in April 2005 as the Electricity and Gas Complaints Commission reflecting that the gas sector joined the scheme from 1 April 2005.
There are three main components of the scheme:
- The Code of Practice [external link - 283 kB PDF] - every member company [external link] agrees to maintain the standards in the Code for all of their dealings with customers.
- The Internal Complaints Process - each company must provide a formal complaints process for customers who aren't happy with some facet of the company's service. All consumers with complaints must follow the individual company's formal complaints process before approaching the Commission
- The Complaints Commissioner - an independent, qualified person who will help customers resolve complaints if the company has not resolved any complaint in a satisfactory manner. The Commissioner can award money to customers if they find a company is at fault.
59. April 2002: Reporting of Hydro-Spill
As proposed in the Government Policy Statement (see section 54), the Electricity Governance Establishment Project developed a regime for the disclosure of hydro spill by major generators. Under the draft rules each hydro generator must report hydro spill information to the Governance Board quarterly within four weeks of the end of 31 March, 30 June, 30 September and 31 December in each year. The first reporting period was for the March 2002 quarter. The Electricity Commission now monitors each generator's hydro spill [external link].
60. July 2002: Hedge Index
A further initiative proposed in the Government Policy Statement (see section 54) was the development of an index for fixed price electricity contracts. The index [external link] is designed to provide some means of establishing a forward price curve for electricity.
61. July 2002: Disclosure of Generator Offers and Demand Bids
As proposed in the Government Policy Statement, all bids and offers [external link] from 29 May 2002 will be publicly available four weeks after the day on which they are submitted.
62. December 2002: Government Policy Statement on Financial Transmission Rights Released
The Government required the electricity industry to make new arrangements to manage wholesale electricity price risk caused by transmission line congestion.
The Policy Statement set out the Government's expectations for the development of financial transmission rights (FTRs), which can be used by wholesale market participants as protection against price spikes caused when transmission lines operate at full capacity. It established a set of guiding principles and a framework for the development of FTRs, including an auction market for trading them. It also specified how the regime would be governed.
(This Policy Statement was superseded by the October 2004 Government Policy Statement on Electricity Governance and the Electricity Commission is now required to complete this work.)
63. February 2003: Redetermination of Maui Gas Reserves
The Government received the final redetermination of gas reserves from the independent expert carrying out the review of the Maui field, which confirmed that the Maui reserves were lower than originally estimated by about 238 PJ. Taking into account total usage to date, this meant that approximately 370 PJ of Maui gas remained to be recovered at the Maui contract price.
64. March-June 2003: Winter Supply Shortage
The Government identified the prospect of a dry year for New Zealand's hydroelectric system, and an electricity savings campaign was planned and implemented progressively with the assistance from the electricity industry's Grid Security Committee and Winter Power Group.
The Government subsequently set a 15 percent electricity savings target for the government sector in order to provide leadership in electricity savings to help reduce the risk of winter power shortages. The public was asked to endeavour to achieve savings of 10%.
65. April 2003: Government Prepares for New Electricity Governance Arrangements
The Government gave notice that it was preparing to establish a new governance board for the electricity industry in case the industry failed to reach agreement on a new self-governance structure.
66. May 2003: Government Announces Establishment of an Electricity Commission
The Government announced that a new Electricity Commission [external link] would be established to take over governance of the electricity industry. The Commission would secure reserve generation to ensure New Zealand's electricity needs can be met even in very dry years without power savings campaigns. This would involve significant changes to the electricity sector designed to deliver long-term electricity supply security and to curb extreme price volatility in the electricity spot market in dry years.
The Commission would be responsible for managing the electricity sector so that electricity demand could be met in a 1-in-60 dry year without the need for national power conservation campaigns. It would do this by contracting with generators for the provision of dry year reserve generation capacity and fuel.
67. July 2003: New Power Plant for Security of Supply
The Government announced that a new 155 megawatt oil-fired power plant would be built before winter 2004 to help provide increased certainty of electricity supply. It was planned to be sited at Whirinaki, Hawkes Bay, and would provide reserve generation for use during very dry periods when hydro lake inflows were abnormally low. It would also provide reserve generation to cover major breakdowns in other generating plant. Contact Energy would install and operate the Government-owned plant at its Whirinaki site.
68. September 2003: Further Government decisions on Reserve Energy
The Government announced further details of the reserve generation policy. The Electricity Commission [external link] would be expected to contract for low fixed cost options for reserve energy, which will tend to have high variable costs. New generation plant and plant that would otherwise be mothballed or retired would both be eligible to be considered for reserve energy. In addition, the Commission could contract with large electricity users for demand reductions as part of the reserve energy portfolio.
The Commission would be able to contract for reserve energy up to a maximum of 1200 gigawatt-hours (GWh) over a four month period, the equivalent of 400-500 megawatts (MW) of thermal plant and/or load. Generation plant that had been ring-fenced as reserve energy would only be available to protect electricity security, which would minimise any impact of reserve energy on incentives to build ordinary generation facilities.
The costs of reserve energy would initially be recovered by means of a levy pending consideration by the Commission of alternatives to a levy.
69. September 2003: Electricity Commission Established and Draft Government Policy Statement on Electricity Governance Released
The Electricity Commission [external link] was established - membership of Roy Hemmingway (Chair), David Close, Douglas Dell, Peter Harris, Graham Pinnell and Christine Southey - and began operations on 14 September 2003. The costs of the Commission are recovered from the electricity industry via a levy.
A revised draft Government Policy Statement on Electricity Governance, setting out key improvements to the electricity industry that the Government expected the Commission to oversee in addition to its routine governance responsibilities, was released for consultation (see section 78).
70. December 2003: Electricity (Hazards from Trees) Regulations 2003
New regulations governing the trimming of trees near power lines came into effect. These were designed to promote safety and help prevent power outages and fires caused by problems with trees and power lines.
71. March 2004: New Electricity Market Arrangements Established Under Electricity Governance Rules and Regulations (Enacted in December 2003)
The new arrangements, which came into effect under rules and regulations enacted in December 2003, terminated the former operations under the New Zealand Electricity Market and the Metering And Reconciliation Information Agreement (MARIA). The Electricity Commission [external link] took over responsibility for operating the electricity market.
72. April 2004: New Regulatory Framework for Transmission Investment and Pricing
A new regulatory framework for transmission investment and pricing was announced to come into effect on 28 May 2004. The elements of that framework will progressively be put in place. The process requires the Electricity Commission to publish its own Statement of Opportunities, which is an assessment of the future adequacy of the electricity system. The Commission also develops grid reliability standards and a grid investment test, which are used to guide grid upgrade plans. The Commission will then assess Transpower's proposed grid upgrade plan, including consideration of alternatives to specific investments. Transpower is unable to recover the costs of grid investment without Electricity Commission approval. Other elements of the process include the Commission approving a transmission pricing methodology and developing a benchmark transmission agreement.
73. June 2004: Whirinaki Reserve Generation Plant Commissioned
This 155MW station was commissioned on 1 June 2004, and was intended to help provide increased certainty of electricity supply. It would only run when the limits of the electricity system were tested by problems such as low inflows to the hydro lakes or a major generation or transmission breakdown. It is owned by the Government and responsibility for issuing instructions on when it will operate were transferred to the Electricity Commission [external link] from 1 April 2005.
74. August 2004: Risk-Sharing Agreement with Genesis Energy to Facilitate Construction of Combined Cycle Plant at Huntly Concluded
The Government announced that it would facilitate the development of Genesis Energy's [external link] 385 MW combined cycle gas turbine plant (known as e3p) at Huntly by agreeing to share a limited amount of risk [external link] with Genesis around the long term supply of gas, as a one-off arrangement. This commitment ensured that Genesis Energy could proceed with the development within normal commercial parameters.
75. September 2004: Electricity (Low Fixed Charge Tariff Option for Domestic Consumers) Regulations 2004
New regulations came into force compelling all electricity retailers to make available a domestic tariff, the fixed charges portion of which must not exceed 30 cents per day excluding GST. This tariff would benefit consumers who used less than the average 8000 kWh of power per year.
76. October 2004: Electricity and Gas Industries Bill Passed
The Bill updated the Electricity Act to reflect the establishment of the Electricity Commission. This includes updating the specific outcomes that the Government wants to the Commission to achieve, including security of supply and energy efficiency. It also provided improved regulation-making powers, in particular to enhance security of supply and consumer protection.
The Bill also amended to Electricity Industry Reform Act to ease restrictions on lines companies owning electricity generation.
The Bill amended the Commerce Act to clarify the interface between the functions and powers of the Commerce Commission and the Electricity Commission relating to control of prices, revenues and quality standards for electricity distribution businesses.
77. October 2004: New Government Policy Statement on Electricity Governance Published
A new Government Policy Statement (GPS) on Electricity Governance covering the responsibilities and direction of the Electricity Commission was published. It sets out the priorities of the Commission as -
- Managing security of supply and implementing the reserve energy mechanism;
- Working with Transpower and grid users to facilitate priority investment in the grid;
- Promoting efficient use of electricity; and
- Improving hedge market transparency and liquidity and demand-side participation.
This GPS supersedes the GPS released in December 2000 and the February 2002 revision.
78. October 2004: Sustainable Energy Discussion Document Released
A comprehensive discussion document on the future of sustainable energy in New Zealand was released. It was designed as the focal point for six months of consultation, the outcome of which would be the starting point for formal sustainable energy policy development. The document explores what a sustainable energy system might look like and how New Zealand might achieve it.
79. August 2005: Resource Management and Electricity Legislation Amendment Act Passed
This Amendment Act improved the Resource Management Act 1991 and made amendments to the Electricity Act 1992 to improve the quality of decisions and processes by increasing certainty and reducing delays, costs and incorrect use of processes, while ensuring appropriate public participation and the meeting of environmental objectives. The six main objectives were:
- Enabling central government to better express the national interest so that decision makers have clear guidance on taking national interest matters into account;
- Enabling consent processes to be undertaken in an effective and efficient manner that provides certainty of process for applicants;
- Improving the effectiveness of planning documents and enabling their timely development;
- Improving certainty of consultation requirements for resource management matters;
- Providing certainty over the allocation of resources; and
- Providing for the environmental effects of high voltage electricity works in road corridors to be managed using Resource Management Act processes.
80. June 2006: Electricity Blackout in Auckland
An electricity blackout to the central business district and southern suburbs of Auckland occurred on 12 June 2006 when component failure resulted in an earth wire falling across live conductors at Transpower's Otahuhu substation. Around 1,000 MW of supply was lost at about 8.30 am, with power being restored to various parts of Auckland between six and nine hours later. Subsequent investigations revealed shortcomings in maintenance procedures and the need to diversify supply into Auckland.
81. August 2006: Investment Regime for Transmission and Distribution Improvements
Two Government policy statements to encourage investment in infrastructure were released.
The first was a consultation draft of proposed amendments to the Government Policy Statement on Electricity Governance to emphasise the strategic importance attached to timely investment in transmission infrastructure. It followed record electricity demand on the grid, a significant transmission outage in Auckland and delays in decisions on Transpower's proposed North Island grid upgrade.
The second was a published statement of the Government's economic policy under s26 of the Commerce Act, and focused on the importance of regulated businesses such as Transpower and electricity lines businesses investing in new lines and other infrastructure. It was intended to give businesses the confidence and incentives to make new investments.
82. October 2006: Updated Policy Statement on Transmission Released
An updated Government Policy Statement on Electricity Governance, designed to improve the quality and timeliness of decision-making on transmission, was released. This superseded the Government Policy Statement of October 2004.
The revised statement was designed to:
- Emphasise the importance of security of supply in transmission, including in extreme events, by providing for diversity of supply routes, especially for large load centres like Auckland;
- Ensure that the grid facilitates competition in generation and minimises transmission constraints; and
- Ensure that transmission planning supports the Government's goal of facilitating renewable energy.
83. December 2006: Electricity Market Review Completed
A review of the electricity market, prompted by ongoing concerns about security of supply and price increases, was completed. The review concluded that the performance of electricity market arrangements had been mixed, and that while the current regulated market should be retained, a range of enhancements should be pursued to improve performance, particularly regarding security of supply.
Areas identified for further work included:
- Security of energy supply;
- Security of the grid and electricity lines;
- Wider issues affecting security of supply;
- Wholesale market design and competition issues;
- Transmission pricing;
- Assistance to low-income households;
- Energy efficiency initiatives; and
- Institutional arrangements and role clarity.
Legislative amendments to facilitate investment in generation by lines companies were also proposed.
84. July 2007: Electricity Commission Notified Approval of Transpower's Proposal for a Transmission Line into Auckland
In April 2006 the Electricity Commission issued a draft decision [external link] to decline Transpower's proposal to build a new 400 kV line between Whakamaru and Auckland. The Commission considered that there were alternatives which would provide the same level of electricity security but would be less expensive than the proposed 400kV line, and at that stage could not therefore approve the proposal.
In May 2006 Transpower suspended its application to construct the line in order for discussions to be held with the Commission. In October 2006 Transpower submitted an amended proposal and the Commission withdrew its draft decision to decline the original application.
In January 2007 the Electricity Commission announced that it intended to approve a suite of measures [external link - 235 KB PDF] proposed by Transpower to improve the reliability of electricity supply into Auckland and on to Northland. The main feature of Transpower's proposals was a new 400 kV transmission line between Whakamaru and Pakuranga (Auckland). The line would operate initially at 220 kV.
The Commission's draft approval was subject to consultation with a range of interested parties, including a public conference, before a final decision was taken.
Following the public conference and further input from interested parties, in July 2007 the Commission issued its final majority decision [external link] to approve Transpower's North Island grid upgrade proposal.
85. August 2007: Electricity Governance (Connection of Distributed Generation) Regulations Notified
These regulations were drawn up to enable connection of distributed generation in conformity with consistent connection and operation standards. They specify:
- a framework for connection of distributed generation;
- processes (including time frames) under which generators can apply to distributors for approval to connect distributed generation (including the information to be exchanged and the criteria for approval);
- the regulated terms that apply to the connection of distributed generation in the absence of contractually agreed terms;
- a default dispute resolution process for disputes related to these regulations;
- the pricing principles to be applied for the purposes of these regulations; and
- prescribed maximum fees.
86. October 2007: New Zealand Energy Strategy
In July 2006 the terms of reference for the development of a New Zealand Energy Strategy (NZES) were released. The strategy was intended to identify priorities to achieve the Government's energy objectives of:
- Reliability and resilience;
- Environmental responsibility; and
- Fair and efficient prices for energy for current and future generations.
In December 2006 the government's draft New Zealand Energy Strategy was released for consultation. The draft strategy was accompanied by a discussion paper on Transitional Measures which looked at options for moving towards low emissions electricity and stationary energy supply and facilitating a transition to greenhouse gas pricing in the future.
Following consideration of submissions on the draft strategy, the final strategy was released in October 2007. It is intended to set the country on a path towards clean, renewable energy, in accordance with the government's vision for a sustainable, low emissions energy system, and includes an action plan to make that vision a reality.
Key actions include:
In December 2006 the draft New Zealand Energy Strategy was released (refer item 84). Following receipt and consideration of submissions on the draft strategy, in October 2007 the final strategy was released. It was intended to set the country on a path towards clean, renewable energy, in accordance with the government's vision for a sustainable, low emissions energy system, and included an action plan to make that vision a reality.
Key actions included:
- Resilient, low carbon transport
- Updating the New Zealand Transport Strategy in 2008
- Developing policies to encourage greater provision of public transport, cycling and walking
- Developing a New Zealand Domestic Sea Freight Strategy
- Developing average fuel economy standards for light vehicles at point of import
- Establishing an expert advisory group to look at future vehicle technologies, such as biofuels and electric cars
- Introducing the Biofuels Sales Obligation on 1 April 2008
- Security of electricity supply
- Reviewing reserve energy policy to determine whether any additional measures are required
- Developing national guidance under the Resource Management Act for electricity transmission
- Introducing amendments to the Electricity Industry Reform Act to relax some conditions around investment by lines companies
- Promulgating regulations for distributed generation
- Developing gas wholesale and transmission market arrangements to make it easier to establish more flexible and secure gas supply arrangements
- Low emissions power and heat
- Deciding "in-principle" to introduce an emissions trading scheme
- Providing a clear message to state-owned electricity generators about the government's view that there should be no need for new baseload fossil fuel generation for the next ten years
- Considering regulatory options under the Electricity Act 1992 for limiting new baseload fossil fuel generation over the next ten years
- Developing a national policy statement for renewable energy in 2008
- Providing greater guidance on "call-in" under the Resource Management Act
- Using energy more efficiently
- (Refer to the Energy Efficiency and Conservation Strategy)
- Sustainable energy technologies and innovation
- Introducing tax credits for research and development expenditure
- Providing a contestable fund of $8 million over four years for the deployment of marine generation devices in New Zealand
- Establishing a contestable fund of $12 million over three years to support new low-carbon energy technologies
- Affordability and wellbeing
- Amending regulations for the low fixed tariff option for domestic electricity consumers to take into account regional climate variations that impact on heating costs
- Considering the provision of assistance for households to adjust to higher electricity prices arising from the introduction of emissions trading
- Supporting the provision of high-quality energy information to householders
The Strategy includes a target of generating 90 per cent of New Zealand's electricity from renewable energy sources by 2025.
New Zealand Energy Strategy to 2050 – Powering Our Future
87. October 2007: Revised New Zealand Energy Efficiency and Conservation Strategy
A revised New Zealand Energy Efficiency and Conservation Strategy (NZEECS) was launched alongside the Energy Strategy. It provides an action plan to:
- Promote sustainability as part of New Zealand's national identity
- Improve the quality of life for New Zealand families
- Drive economic transformation in business
It is an action plan for many of the programmes in the NZES, and its programmes are complementary to the Emissions Trading Scheme in achieving emissions reductions.
The NZEECS targets actions in five areas:
New Zealand Energy Efficiency and Conservation Strategy [link to EECA website]
88. March 2008: National Policy Statement on Electricity Transmission
This National Policy Statement on Electricity Transmission requires decision makers to consider the national significance of a reliable and secure electricity supply - as well as adverse environmental effects - when assessing proposals for New Zealand's national transmission grid. It gives guidance to local governments across the country about the management and future planning of the national grid.
Its main purpose is to make it explicit that electricity transmission is a matter of national significance under the Resource Management Act, as an efficient and well-managed national grid is vital for communities, the environment and businesses across the country. The statement ensures that there is a balanced consideration of national benefits and local effects of electricity transmission. It contains 14 policies intended to facilitate the operation, maintenance and upgrade of the existing network and any new transmission networks, while at the same time managing any adverse environmental effects of the network, and managing the adverse effects of other activities on the network.
National Policy Statement on Electricity Transmission [link to Ministry for the Environment website]
89. April 2008: Electricity (Disconnection and Low Fixed Charges) Amendment Act
In response to concerns about the disconnection practices of electricity retailers, the Electricity Commission developed new guidelines for disconnections resulting from non-payment of electricity accounts, particularly where vulnerable consumers were affected. The Amendment Act ensures that the government can, if necessary, regulate the content of the guidelines.
The Electricity (Low Fixed Charge Tariff Option for Domestic Consumers) Regulations 2004 required networks and retailers to provide a low fixed charge tariff option to domestic consumers who consume less than 8,000 kWh of electricity per year at their primary dwelling. The Amendment Act alters this requirement by providing for the definition of a ‘‘low-use consumer'' to vary according to the particular area of New Zealand in which the consumer's domestic premises was situated, in order to take account of varying climatic conditions. Area boundaries, defined in amended regulations which come into force in April 2009, specify 9,000 kWh per year for Christchurch and points south but excluding the West Coast.
Amendments to the LFC Regulations
90. April 2008: New Transmission Pricing Methodology
In June 2007 the Electricity Commission recommended a Transmission Pricing Methodology (TPM) to the Minister of Energy. The TPM was included as schedule F5 to section IV of part F of the Electricity Governance Rules, effective from 1 April 2008. The Electricity (Transpower's Pricing Methodology) Regulations 2004 were revoked in July 2008.
Electricity Governance Regulations [link to Electricity Commission website]
91. May 2008: Updated Policy Statement on Electricity Governance
The Government Policy Statement on Electricity Governance (GPS) was revised and updated to be consistent with the New Zealand Energy Strategy and New Zealand Energy Efficiency and Conservation Strategy, and to reflect changes since the GPS was originally released in October 2004.
The changes included:
- documenting a target of generating 90 per cent of electricity from renewable sources by 2025;
- providing for an assessment of ways in which wind generation could best be integrated into the system alongside geothermal and other forms of generation;
- requiring consideration of the need for grid upgrades to transfer renewable electricity from the point of generation to the points of consumption; and
- updating reserve energy policy in line with the outcome of a comprehensive review carried out by the Electricity Commission.
Government Policy Statement on Electricity Governance
92. May-July 2008: Winter Supply Shortage
During 2008 the driest March - June period since 1947 was recorded. By June hydro storage had approached the Emergency Zone, indicating a roughly 10 percent chance of electricity cuts being required. Constant monitoring and evaluation of conservation options by the Electricity Commission, with assistance from the electricity industry, included a public awareness campaign led by the industry encouraging all consumers to use power prudently and make savings whenever possible. The campaign was discontinued in mid-July.
The Commission has commenced a review of its experience in managing dry year risk, and will look at the performance of arrangements in the lead up to winter, the market responses once it became evident that supply would be tight, and the operation of the reserve energy scheme.
93. July 2008: Review of Electricity Market Design by Electricity Commission
competition and prices, energy affordability and methods of paying electricity generators were key focus areas of a review of the performance of the electricity market which began in 2007.
An options paper released in July 2008 examined in detail five key areas of concern to stakeholders, and developed a range of options to address them. The five areas were:
- pricing and competition, especially in the retail market
- energy affordability issues
- the effectiveness of the energy-only spot market design
- demand-side participation
- availability of market information
Market Design Review Options paper [external link]
94. September 2008: Electricity Industry Reform Amendment Act
This Act implemented three main policy changes.
The first made it easier for owners of lines businesses to sell the output of the generation they were permitted to own under the 2001 and 2004 amendments to the Electricity Industry Reform Act 1998. The objective was to encourage the owners of lines businesses to invest in permitted generation, especially generation from renewable energy sources.
This policy objective was achieved by:
- allowing sales of electricity of up to 100% of the nominal annual output capacity of permitted generation (Previously, allowed sales were the actual output of the generating station, which could be very variable over time, especially in the case of generation from a renewable energy source, making it difficult to retail to customers.)
- allowing electricity generated from permitted generation to be traded via financial hedges to manage spot market risks
- lowering the cost of corporate separation and compliance with arm's-length rules by –
- raising the threshold for requiring compliance to 10 MW (up from the higher of 5 MW or 2% of maximum demand)
- allowing the same person to be a director of both lines and supply (generation and retailing) businesses, while requiring at least one independent director and not permitting executive directors
- allowing the same person to be a manager of both companies up to a threshold of 30 MW (Joint staff and premises are permitted without limit.)
The second main change narrowed the scope of ownership separation requirements to focus on the geographic areas where there is potential for the exercise of market power and anti-competitive practices – namely, where lines and supply are co-located. This was achieved by allowing owners of lines businesses to be involved in generation and retailing without limits outside of their lines area. Requirements for corporate separation and compliance with arm's-length rules outside their lines area were also to be repealed.
Existing ownership separation rules were retained where lines and supply are co-located, because co-owned, co-located lines and supply businesses have both incentive and ability to lessen competition in retailing and local generation. Ownership separation removes this incentive and ability. Where co-located cross-ownership of lines and supply was permitted in order to encourage investment in permitted generation, corporate separation and the requirement to act on an arm's-length basis was retained in order to reduce the risks of anti-competitive behaviour.
The third main change amended the definition of renewables. Previously the owner of a lines business could only invest without quantity limitations in "new renewables", which were defined to exclude hydro and geothermal generation using traditional technologies. The new definition included all renewables, to reflect the government's policy of encouraging the development of renewable energy.
95. September 2008: Climate Change (Emissions Trading and Renewable Preference) Act
This Act established the New Zealand Emissions Trading Scheme and legislated the government's preference for new renewable electricity generation.
The preference for new renewable generation was achieved through the introduction of a 10-year restriction on new baseload fossil-fuelled thermal electricity generation, except to the extent required to ensure the security of electricity supply. This took effect through a new part 6A added to the Electricity Act 1992, with the provisions applying to any proposed thermal generation above 10 megawatts that used more than 20 percent of fossil fuels as its fuel source.
This measure gave legislative backing to the policy outlined in the New Zealand Energy Strategy, and ensured that privately-owned and publicly-owned generators operated under the same conditions. Exemptions to the prohibition will be possible in some circumstances, including when thermal generation is appropriately mixed with renewables or based on waste products, where it is needed in an emergency or to ensure security of supply, or where the needs of isolated communities are most logically met by thermal generation. The Electricity Commission recommends whether exemptions are warranted.
96. September 2008: Commerce Amendment Act
This Act included a new Part 4 of the Commerce Act (replacing former Parts 4 and 4A) which put in place improved regulatory regimes for electricity lines businesses. An objective was to provide for efficient and cost-effective regulation of infrastructure services, such electricity lines businesses, which are not subject to competition. All OECD countries regulate these types of services because they are essential and because, in the absence of regulation, suppliers could charge excessive prices or provide poor quality service.
The Act aimed to promote outcomes consistent with those produced by competitive markets, including providing incentives to invest, innovate and make efficiency gains, while requiring suppliers to share gains with consumers and to limit excessive profits.
A major improvement to the current regime was a provision requiring the Commerce Commission to develop rules, requirements and procedures, collectively called "input methodologies", for regulation. The Act required the Commission to set input methodologies for electricity lines businesses by 30 June 2010.
The Act also provided for 100 percent consumer-owned lines businesses (about 16) to be subject only to information disclosure regulations, because the consumers, as owners, are able to influence the rates of return and price-quality trade-offs made by the business. The remaining lines businesses (about 11) are now subject to a new default/customised regime (as well as information disclosure), instead of the Part 4A thresholds regime.
As part of the new electricity lines regime, the Commerce Commission was required to provide incentives to improve energy efficiency and demand-side management, and to reduce energy losses, as part of the government's commitment to address climate change.
97. September 2008: Electricity (Continuance of Supply) Amendment Bill
Section 62 of the Electricity Act 1992 requires electricity lines companies to maintain services to those connections established as at 1 April 1993. This section expires and is deemed to be repealed on 31 March 2013. Lines built from April 1993 are not affected by this repeal.
A discussion paper [Review of Section 62 of the Electricity Act 1992 "Continuance of Supply" (2013 review): Discussion Document] issued in August 2007 initiated a review to consider what new arrangements, if any, should be put in place to ensure that affected communities would continue to have access to an electricity supply after 2013 in a way that was efficient, fair, reliable and delivered in an environmentally sustainable manner.
The government decided in May 2008 that the supply of electricity to consumers in remote rural areas would continue to be protected beyond 2013 by revising section 62 of the Act so that the obligation to supply those places would no longer expire in 2013. This obligation would be able to be met by using either lines or, where local consumers agree, alternative local generation.
A bill giving effect to this decision is under consideration by the Commerce Select Committee.
Review of Section 62 of the Electricity Act "Continuance of Supply" (2013 review)
98. September 2008: Approval of HVDC Upgrade by Electricity Commission
The Commission announced its intention to approve the upgrade in late July, and held a public conference to provide a final opportunity for comment on the proposed upgrade. In September it gave final approval for Transpower to spend up to $672 million in upgrading Pole One of the HVDC link between the South and North Islands.
The HVDC proposal is a two-stage project that will involve construction of new converter station facilities at Haywards and Benmore and decommissioning of the old equipment. The two HVDC poles will have a capacity of 1200 MW when stage 2 is completed in 2014. The project does not include replacement of the existing transmission line and submarine cables.
Electricity Commission gives final approval to HVDC upgrade [external link]
99. September 2008: Draft National Policy Statement on Renewable Electricity Generation
The government's intention to prepare a national policy statement for renewable electricity generation was announced in the New Zealand Energy Strategy as a key action in support of the government's sustainable energy goals. It will also complement the New Zealand Energy Efficiency and Conservation Strategy [external link], and will help strengthen the policy framework relating to renewable energy and the control of greenhouse gas emissions.
The proposed Statement will establish the national significance of benefits associated with renewable electricity generation by clarifying the government's position on these benefits. It will help promote a nationally consistent approach to balancing the competing values associated with the development of renewable energy resources, and will provide greater certainty to decision-makers, applicants and the wider community.
National policy statement for renewable electricity generation [link to Ministry for the Environment website]
100. December 2008: Electricity (Renewable Preference) Repeal Act
This act removed the ten-year restriction on new baseload fossil-fuelled thermal electricity generating capacity under Part 6A of the Electricity Act 1992, in the interests of security of supply (refer item 95).
101. February 2009: National Grid Upgrade
Transpower announced a $50 million programme of upgrading work on the national transmission grid, involving acceleration of maintenance work originally scheduled to be undertaken over a ten-year period. A further $50 million of conductor upgrading work was also scheduled.
102. April 2009: Ministerial Review of Electricity Market
A Ministerial review of the electricity market was announced, with the review team being supported by a technical advisory group of six independent experts. The review is examining market design, regulation and governance issues, drawing on work done by the Electricity and Commerce Commissions as input to the review. A discussion paper and subsequent consultation will take place between July and September, with final Cabinet approvals and preparation of any necessary legislation planned to be complete before the end of the year.
www.beehive.govt.nz/release/ministerial+review+electricity+market
103. April 2009: HVDC Link Failure
On 27 April Pole 2 of the link had to be taken out of service as a result of a transformer failure at Benmore. This limited the capacity of the link to around 200 MW using the vintage Pole 1 circuit only. The system was restored to full availability on 30 April.
104. May 2009: North Auckland and Northland Transmission Project Approved
This $473 million project to increase capacity and reliability of supply to points north of Auckland city and into Northland was approved by the Electricity Commission. The major component of the project is 27 kilometres of cable between Penrose and Albany, passing through ducting under the harbour bridge and along the northern motorway. Completion of the project is scheduled for 2014.
105. May 2009: Revised Policy Statement on Electricity Governance
A revised version of the GPS was issued to reflect current government policies, with a particular emphasis on accelerated prudent transmission grid investment in the interests of enhanced security of supply. The statement introduced a streamlined and simplified process for approval of grid investments under $20 million in value.
www.med.govt.nz/upload/67862/may2009_gps.pdf
106. May 2009: Draft Decision of Board of Inquiry into Transpower’s Proposed Upgrade of Upper North Island Transmission Grid
Transpower New Zealand proposed building a new overhead electricity transmission line, underground cables and substations in the upper North Island (refer item 84). The Minister for the Environment called in Transpower's proposal in August 2007, and subsequently appointed an independent Board of Inquiry to conduct a hearing and make a final decision on matters associated with Transpower’s proposal. The hearing commenced in late March 2008 and the Board announced in May 2009 a draft decision in favour of the proposal. The draft decision is open for comment, with the final decision expected before the end of 2009.
www.mfe.govt.nz/rma/call-in-transpower/board-of-inquiry/report-and-decision
107. May 2009: Commerce Commission Report on Electricity Company Breaches of Commerce Act Released
In late 2005 the Commerce Commission opened an investigation into whether any participants in the wholesale or retail electricity markets may have breached Part 2 of the Commerce Act, after a number of complaints relating to high electricity prices, large company profits, a perceived low level of competitive activity and alleged anti-competitive activity were received. The Commission engaged Professor Frank Wolak of Stanford University to assist with this work.
The Commission found no evidence of breaches of the Act, although it did issue one warning regarding a risk of a breach. A summary was published in the Commission’s media release No 130 of 21 May 2009 – www.comcom.govt.nz//MediaCentre/MediaReleases/200809
www.comcom.govt.nz/BusinessCompetition/Publications/
Electricityreport/DecisionsList.aspx
Back to Top