Minister of Energy Letter to the Chair of Transpower

Mr David Gascoigne
Chairman
Transpower New Zealand Ltd
PO Box 1021
Wellington

Dear David

This letter is to formally send to Transpower a copy of the amendments the Government proposes to make to the Government Policy Statement on Electricity and to set out clearly my expectations concerning Transpower's role.

As I announced yesterday, the Government wants to emphasise the strategic importance it attaches to timely investments in infrastructure. To that end, the Government proposes a number of amendments to the GPS designed to improve the quality and timeliness of decision-making on transmission. (The amendments are subject to consultation with the Electricity Commission as required by the Electricity Act.)

I will not spell out the changes here as they are covered in my media release and the draft amended GPS. However, there are a three points I would like to draw particularly to your attention, namely:

• that grid upgrade plans submitted by Transpower should be as comprehensive as possible, ideally covering short, medium and long-term projects, to facilitate proper consideration of wider synergies and consideration and approval of proposed expenditure within a longer term framework;
• the need to maintain stakeholder confidence at all times that security of supply can and will be maintained, if necessary through contingency measures;
• the need for improved diversity of supply routes to major cities where practical. Obviously, the maintenance failure at Otahuhu on 12 August has influenced the Government’s thinking in this regard.

The Government has also released a s26 statement under the Commerce Act to set out its policies regarding the incentives to invest for businesses regulated under Parts 4 and 4A and sections 70 to 74 of Part 5 of the Commerce Act.

These initiatives have been interpreted by some commentators as the Government siding with Transpower over the Electricity Commission on regulatory matters. I want to make it clear that this is not the case. This is readily apparent in respect of alternative points of supply being emphasised as a consequence of the problem at Otahuhu on 12 June.

The success of the regulatory regime for transmission and the achievement of the Government's objectives in transmission are critically dependent on a constructive and flexible approach by all parties including Transpower.

I consider that any difficulties in the relationships that have developed between Transpower and the Electricity Commission concerning the proposed new line between Whakamaru and Otahuhu are at least partly attributable to Transpower. I recognise that both parties are now seeking to work constructively together and I urge you to continue to do so.

The Electricity Commission has an important job in determining whether Transpower's grid upgrade plans should proceed or be amended. To do this job effectively requires Transpower to play its part, in particular through the provision of timely, high quality information that meets regulatory tests.

I expect to see a marked improvement in the relationships between Transpower and the Electricity Commission. This will require a more constructive and flexible approach by Transpower, as well as by the Commission. Security of supply and business and community confidence in proper processes and quality outcomes is too important to be put at risk.

I am confident that Transpower, as well as the Commission, will respond positively and constructively to the Government's requirements for better processes as we collectively address the challenge of improving New Zealand's infrastructure.

Yours sincerely

David Parker
Minister of Energy

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