| Explanatory note - 5% or 2MW vs. 5MW or 2% |
Confused by the comment on page 1 of the draft Bill's Explanatory note that (second-to-last bullet point on the page) the objective will be achieved by – amongst other things – "raising the threshold for requiring compliance to 10 MW (up from the higher of 2 MW or 5% of maximum demand)". The existing threshold established in the 2001 Amendment Act [clause 4 – amendment to 5(2)(e) of the principle Act] is "…the greater of 5 MW … and 2% of maximum demand…". We assume that this is simply a transposition of numbers in the current Bill but it would be helpful to have this clarified. |
ENA |
Typing error |
Correct error |
| General |
TrustPower does support line companies being able to invest in an unrestricted amount of electricity generation (not just renewables) and to retail electricity to any consumer outside of their line network area. But notes that the Bill has six fundamental flaws being:
(a) weak ownership separation and arms length rules;
(b) lack of protection from use of commercially sensitive market information;
(c) lack of identification of significant disadvantages to some consumers and communities
as a result of the Bill becoming law;
(d) the risk of small Trust owned companies exposing beneficiaries to excessive risk;
(e) not allowing generation investment for local security of supply except for Transpower;
and
(f) reduction in customer choice in areas where generation develops and risk of service
degradation. |
Trustpower |
Trustpower's concerns are similar to those raised by other generators, that a relaxing of the separation rules will be detrimental to competition and consumers. Consultation is not revisiting major components of policy decisions. |
No change |
| General |
Regulatory Impact Analysis (RIA) assumed a counterfactual based on a decision in November 2006 to amend the EIRA. MEUG recommend the government publish a RIA to support the draft Bill using as the counterfactual the status quo and failing that; then the draft Bill should be withdrawn. |
MEUG |
Bill is to implement cabinet policy agreed in November 2006 to implement change. Is appropriate that this bill takes this decision as status quo and does not need to re-examine the November 2006 cabinet decision. RIA analysis should be read in this context including both RIS from 2006 policy paper and more recent RIA. |
No change |
| General |
We support changes to the EIRA that will restrict the prohibition of cross involvement to cases where actual and significant cross subsidisation or inhibition of competition can occur. We support the specific proposals put forward in the submissions from Powerco and the Electricity Networks Association. |
Babcock and Brown |
Noted |
No change |
| General |
Bill could be improved by revisiting and clarifying policy objectives, rationalising exemptions, thresholds and caps, and incorporating visual aids such as tables or flow charts. |
Genesis Energy |
Agree |
Table showing changes to be provided in explanatory note. |
| General |
There are too many ELBs (being 28) in New Zealand. By making the EIRA requirements less onerous on small ELBs the incentives (weak as they are) to consolidate will be undermined. |
Mighty River |
Noted |
No change |
| Clause 4 - Purpose statement |
The purpose statement should be amended to reflect the Government's objective to encourage investment in generation by lines companies (the purpose statement has not been substantively updated since 1998). |
Vector |
Consider whether purpose statement should include an objective to reduce barriers to investment in renewable generation. |
Update purpose statement to add "limiting barriers to new investment or renewable energy sources" |
| Clause 4 - Purpose statement |
The purpose statement should refer to "incentives" to cross subsidise and/or act anti-competitively rather than "incentives and opportunities" and/or that incentives and opportunities "that exist or are likely to exist" are considered. |
Vector |
Intent of purpose statement was to capture both incentives and opportunities |
No change |
| Clause 5 - Definition of local network area |
It is poor drafting for legislation to cross refer to Rules to define one of the key concepts in the draft Bill; We refer to Appendix 4 of the Legislation Advisory Committee Guidelines, Principles for Incorporation by Reference which notes: as the use of incorporation by reference is inconsistent with important law making principles, it should be used only where it is impractical to do otherwise |
Meridian |
EGR definition is appropriate but could be incorporated in EIRA to meet concern of link to external. Although the probability of the EGRs adopting a definition that was detrimental or inconsistent with EIRA is remote. |
Copy EGR definition into EIRA. |
| Clause 5 - Definition of local network area |
The definition of "local network" in the draft Bill (and the corresponding meaning of "local network area") cross references the relevant meaning in the Electricity Governance Rules (EGRs).
Amendments to the EGRs can be initiated by the Electricity Commission. Any proposed change to the EGRs is assessed in the context of the function of the EGRs, and not the EIRA. Orion considers that the proposed cross reference to the EGRs could have the unintended practical effect that changes would be made in a way that failed to take due account of the implications from an EIRA perspective.
It is not clear, as a matter of good legislative drafting, that one of the core concepts in the draft Bill should link through to rules made under another Act. Orion appreciates that the geographic concept the MED is proposing might be difficult to define. But it sees this concept as being key to the draft Bill, and believes that it should be defined in its own right in the EIRA. |
Orion |
EGR definition is appropriate but could be incorporated in EIRA to meet concern of link to external. Although the probability of the EGR's adopting a definition that was detrimental or inconsistent with EIRA is remote. |
Copy EGR definition into EIRA. |
| Clause 5 - definition of sell |
Concerned on the ability for lines companies to trade in financial hedges to manage spot market risks. Seek clarification whether the ability applies only to trade in financial hedges or includes trade in spot energy. |
Eastland |
Draft intended for both hedges and energy to be able to be traded to enable risk management. Main requirement is to limit energy sales to generation size for market power purposes and not to restrict hedging. |
Remove hedging from definition of sell. |
| Clause 5 - definition of sell |
Remove the uncertainty as to the ability to trade in spot energy. MainPower believes that this anomaly should be removed/clarified to ensure Lines Companies can trade in spot energy and not just in financial hedging. |
Mainpower |
Clarify |
Remove hedges from definition of sell. |
| Clause 5 - definition of sell |
The definition of sell includes the selling of financial hedges for risk relating to the price of electricity in New Zealand. |
Powerco |
Noted |
Decision taken to remove hedges from definition of selling. |
| Clause 7 - Meaning of 'involved' |
The new section 7(1)(a) refers to core distribution assets but this term is undefined. The new clause 7(1)(b) refers to core generation assets but this term is undefined. |
Mighty River |
Should be defined in terms of definitions from the regulations -e.g. use the word 'line' for distribution assets, connected generation for generation assets. |
Reword to remove words " other core generation" and change line to be "line or any assets used in conjunction with the line". |
| Investment outside local area |
Meridian has a residual concern that some lines companies owned by trusts will engage in risky projects and accept a lower than commercial rate of return, because of weak governance arrangements. The potential for commercially irrational investment creates risks for other competitors in the generation market, which could result in a net lessening or delay of future generation investment. Meridian therefore suggests that the MED consider adding requirements to strengthen stakeholder scrutiny of such substantial investments before a trust owned lines company commits to them. |
Meridian |
Historical precedent for argument of trust investment, but against this is view that trust has more direct shareholder involvement. |
No change |
| Investment outside local area |
MRP believe that where an ELB is involved in on-net and off-net electricity generation/retail activities and is required to operate under corporate separation ALL of its generation/retail activities be required to be operated under the separate corporate entity (and subject to the arms-length rules). Mighty River Power believes that the compliance costs on ELBs would be reduced if all generation/retail activities were operated together due to economies of scale/avoidance of duplication of management etc. |
Mighty River |
Competition concerns do not apply outside local area. Lines business can decide which arrangement would lead to lower costs. |
No change |
| Investment outside local area |
We are surprised the Government the EIRA Bill allows ELBs unrestricted entry into non-renewable off-net generation. We would have expected the removal of the restrictions to apply to new renewable generation only. Removal of restrictions on off-net generation should apply to new renewable generation only, given Government's policy intent to promote renewable generation. |
Mighty River |
Competitions concerns do not apply outside local area regardless of generation type. Lines companies can invest in unlimited quantities of renewables. |
No change- this is a consequence of keeping restrictions only on lines area. EIRA not appropriate vehicle for application of thermal restrictions on lines outside local area. |
| Investment outside local area |
Do not believe it necessary to make a distinction between geographic lines area. Lines company generation development outside of their lines area is not likely to be a preferred strategy as it does not directly serve the interest of their consumer trust owners. |
Network Waitaki |
As noted in policy papers, incentives and opportunities to behave anti-competitively exist in local lines area, therefore there are some restrictions in local lines area. Proposed amendments will relax some restrictions in local area also. |
No change |
| Clause 8 - section 17 |
17(1) and (2) not clear that 'and vice versa' adds meaning. |
Genesis Energy |
Agree |
Text changed |
| Clause 8 - section 17A |
The reference to demand on the line is confusing. We understand the concept of connected generation to be concerned not with a particular line, but with the local network area. Therefore we suggest replacing the words on the line with the words on the local network |
Meridian |
Reasonable suggestion to improve clarity |
Agree |
| Clause 8 - section 17A |
Suggest ..connected generation in respect of the "line" should read as "local network area" |
Orion |
Reasonable suggestion to improve clarity |
Agree |
| Clause 8 - section 17A |
The connected generation cap rule (paragraph 17A) places a limit on installed capacity that is a function of maximum demand from the previous year. While demand typically grows from year to year, it is quite possible for demand in a given lines area to reduce year on year. A reduction in demand could force an owner to divest generation assets to avoid breaching this rule. To avoid such volatility, it may be preferable to base the limit on the maximum demand from any of a set number of preceding years. |
Genesis Energy |
Agree |
Changed to average of previous 3 years |
| Clause 8 - Section 17B |
Paragraph 17B(b)(ii) gives the Minister discretion to approve connected generation on the basis that it uses ‘new or advanced technology'. In every other part of the Act (and the Bill), it is the Commerce Commission that has approval authority. Genesis Energy believes that this approval authority should also lie with the Commerce Commission, as judging whether a generation project uses technology that is ‘new or advanced' should be an apolitical decision. |
Genesis Energy |
Current policy is for ministerial discretion. Consistent with old section 46A. |
No change |
| Clause 8 - Section 17B |
Generation in 17B(a) and (b) should only include generation owned by the ELB at the time it was built. Allowing ELBs to purchase pre-existing renewable generation plant will not add to amount of renewables. Amend to read 'generation commissioned by the person on or after...' |
Mighty River |
Although 17B will act to reduce barriers to investment in new renewables, there is also value in ELBs refurbishing old renewables |
No change |
| Clause 8 - Section 17B |
17B(b) undermines promotion of renewables by providing exemption for fossil fuels. Should be covered by 17A. |
Mighty River |
Rule is consistent with old section 46A |
No change |
| Clause 8 - Section 17B |
The other observation we have about clause 17B(b) is that we do not support providing the Minister of Energy with the discretion as to whether the exemption should be extended (clause 17B(b)(ii)). Where discretion is provided elsewhere for variance from EIRA (notably s 81) the discretion is provided to the Commerce Commission. Mighty River Power recommends clause 17B(b) be deleted. |
Mighty River |
Rule is consistent with old section 46A |
No change |
| Clause 8 - Section 17B |
TLC submits that references to "20 May 2003" in the Bill should be amended where appropriate. For example, the new section 17B(a) should be amended by removing the reference to 20 May 2003. In this way, lines businesses may continue to rely on the renewable generation exemption under section 46A in relation to power schemes existing as at 8 August 2001. |
Russel Mcveigh - TLC |
Amend dates |
Amend 17B(a) to change reference to 20 May 2003 so that existing 46A exemptions as at 8 August 2001 apply. |
| Clause 8 - Section 17B |
Confirm methane gas generation qualifies as ‘renewable generation', under the revised definition. The definition of renewable generation has been changed to include solar, wind, hydro, geothermal, biomass, tidal, wave or ocean current sources. |
Mainpower |
Revert to the 2004 definition of renewable but just remove the exclusion of (4) (b) [hydro and geothermal] |
Modify renewables definition |
| Clause 8 - Section 17B |
Section 46A of EIRA provides an exemption for new generation from new renewable energy sources. New generation is defined as generation that is not existing on the date on which that section (Section 46A) comes into force. Section 46A came into force on 8 August 2001. Energy sources that are currently captured by the section 46A exemption (as new generation) will not be exempted by 17B where the generation is not commissioned on or after 20 May 2003. |
Powerco |
Agree |
Incorporate wider original 46A definition of renewables. Date in 17B to be changed to 8 August 2001. |
| Clause 8 - Section 17B |
TLC considers that maintaining and improving existing renewable generation schemes is as important as creating new generation if the overall quantity of renewable generation is to increase. 5.3 In view of that, TLC believes that the Bill should also allow businesses to purchase and upgrade existing renewable generation or to maintain generation schemes that would otherwise fall into disrepair or be decommissioned. Our suggestion is to remove the Bill's current focus on generation commissioned after May 2003. (This would also go a considerable way toward resolving the other problems referred to above.) |
Russel Mcveigh - TLC |
There is value in maintaining and upgrading existing renewable plant, however purpose of changes is to reduce barriers to facilitate investment in new renewables. |
See response to comment above. |
| Clause 8 - Section 17C |
Paragraph 17C(2) changes the amount of permissible on-net retail from the actual energy generated on-net, to an amount based on the nameplate rating of qualifying generation. Genesis Energy agrees that this provides more certainty around permissible on-net retail volumes. However, the permitted generation under the Bill could be more than twice the energy actually generated (depending on the capacity factor of the installed generation). To avoid this distortionary side-effect, it would be preferable for the calculation of permissible on-net retail energy to be scaled using a nominal capacity factor. |
Genesis Energy |
Current policy provides higher theoretical sales level for renewable generator using nominal not actual capacity. But this extra energy has to be bought at spot and hedged so is not risk free to ELB. |
No change |
| Clause 8 - Section 17C |
Todd Energy do not agree with the amendment proposed under clause 17C of the Bill in relation to a persons "qualifying generation" for the purposes of determining the "connected customers selling cap" at it stands. It will provide incentives for line companies to invest in low-cost inefficient non-renewable generation (i.e. generation that is not "encouraged connected generation" under clause 17B) for the purpose of retailing electricity on the line company's own local network. The line company could legitimately justify low generation utilisation the grounds that it is providing peak lopping or firming capacity, but should not be allowed to trade in financial hedges and sell 100% of the nominal annual output capacity unless the ‘non-renewable' generation achieves a (regulated) minimum level of utilisation. |
Todd Energy |
Existing non renewable caps are unchanged in Bill in terms of arms length rules. |
No change |
| Clause 8 - Section 17C |
If the person sells or is involved in selling: The definition of involved states that a person is involved (c) in selling electricity to a customer if the person sells to the customer either on its own or another's behalf. Selling is part of involved in selling and does not need to be mentioned separately. The words sells or should be deleted. |
Meridian |
Agree |
remove "sells or" |
| Clause 8 - Section 17C |
The words "sells or" in 17C(1) should be deleted. The new meaning of "involved" proposed under clause 7 of the draft Bill states that a person is involved in selling electricity to a customer if the person sells to the customer either on its own or another's behalf. The concept of being "involved" in selling electricity includes the act of selling that electricity. The words "sells or" in 17C(1) are therefore unnecessary |
Orion |
Agree |
remove "sells or" |
| Clause 8 - Section 17C |
The reference to new generation referred to in section 17A (a) or (b) is a cross-reference error, as there is no clause 17A (a) or (b). |
Meridian |
Agree |
Amend reference to "section 17B(a) or (b) |
| Clause 8 - Section 17C |
first in (a) and secondly in (b) are redundant and should be deleted |
Meridian |
Agree |
Delete firstly and secondly. |
| Clause 8 - Section 17C |
There appears to be an error in the cross reference to "section 17A (a) or (b)" in proposed new section 17C(2)c. Orion can see no such section in the draft Bill. |
Orion |
Agree |
Amend reference to "section 17B(a) or (b) |
| Clause 8 - Section 17C |
The words "first" in 17C(2)c (a), and "secondly" in 17C(2)c (b) should be deleted. They are made redundant by the fact that both "(a)" and "(b)" are required for new generation to be deemed as connected to the national grid. |
Orion |
Agree |
Delete firstly and secondly. |
| Clause 8 - Section 17C |
The last class of connected generation (class c) is subject to the proviso that the owner in question must not already own more than 400MW of grid-connected generation. From the consultation paper, the 400MW cap is intended specifically to prevent large integrated generator/retailers from accessing the same rights as every other class of owner. In essence, it has turned a pro-competitive amendment (for lines companies) into an anti-competitive amendment for large generators. Genesis Energy recommends that the 400MW cap be removed. This would allow the Commerce Commission to approve grid-connected generation as ‘qualifying generation' on a case by case basis. |
Genesis Energy |
Policy is as intended. Practical consideration is that larger relative size and resources of large integrated generator/retailers makes their acquisition of lines companies financially easier than the converse of lines companies acquiring generators, irrespective of any consideration of equality of rights |
No change |
| Clause 8 - Section 17C |
We note Cabinet's intention to allow grid-connected generation to be counted as 'local' if the Commerce Commission so determines, and that large integrated generator/ retailers should be excluded from this provision so that they cannot vertically integrate with local lines businesses. We note that Cabinet (presumably on the advice of MED) has chosen to use combined generation assets of more than 400MW as a proxy for these large integrated generator/ retailers. We note that this figure of 400MW would not include Todd Energy, which is a generator/ retailer with combined generation assets of approximately 180MW. Meridian submits that a more
appropriate figure would be 100MW. |
Meridian |
400MW may permit vertical integration by smaller generator/retailers - agree threshold is too high |
Suggest reduce to 100MW |
| Clause 8 - Section 17C |
It has been proposed that new grid connected generation owned by lines companies can be treated as being within the "local network" and become "qualifying generation"1 under certain circumstances, and this will allow the lines company to retail that generation to customers in the local network area (clause 17C of the proposed Bill). Todd Energy supports this proposal in principle on the basis the concerns outlined in the following paragraphs are addressed adequately to remove the significant inequality in the treatment of generation that will be created by this change. To remove the potential for anti-competitive behaviour and discriminatory treatment of competitive local grid connected generation, that is introduced with clause 17C of the Bill, while still retaining the legitimate underlying principle of the clause, Todd Energy believes the same "qualifying" considerations must be evenly applied to all grid connected generation that is co-located with grid offtake customers regardless of generation ownership. |
Todd Energy |
Todd suggest the Commerce Commission gives a similar determination, following an application by any grid connected generator, that the generator should be treated as being within the local network area. Following the Commerce Commission determination, the grid connected generator should then be able to approach Transpower directly to negotiate a notional embedding agreement. That is, the Commerce Commission can make a determination that any grid connected generation should be treated as though it was connected to the local network, or using alternative definitions prevalent in other policy/regulatory, the Commerce Commission can determine that grid connected generation be treated as being "embedded" or "distributed". It was not intention of Bill changes to have CC determination on status be binding on Transpower. CC determination is only for purpose of selling rule. |
No change |
| Clause 8 - Section 17C |
While not an issue directly related to this consultation, and as per Todd Energy's prior submissions in this regard, we believe the use of the term "distributed generation" in the context of current Government statutes, regulation and general policy is too restrictive and limits the full use of the term and is thereby limiting the governments ability to deliver on relevant Government policy. The EIRA amendments propose that grid connected generation can, in certain circumstances and with restrictions on ownership, can be deemed to be ‘local' or "connected" to the local network where it falls within the local network area of the lines company. Todd Energy believe all ownership restrictions should be removed such that the Commerce Commission can determine that any grid connected generation similarly be deemed to be ‘local', and this local grid connected generation should be widely acknowledged and classified as "distributed generation" |
Todd Energy |
Noted, but not relevant to consultation |
No change |
| Clause 8 - Section 17C |
MainPower seeks to clarify the retail sales limit, defined as the ‘nominal annual output capacity of permitted generation,' is calculated by multiplying the nominal nameplate installed capacity by 8760 (hours in the year) and by 100% (assumed capacity factor), regardless of generation type. This will ensure all renewable generation types are treated equally under the Amendment. |
Mainpower |
Mainpower interpretation is correct and what was intended. |
Consider a worked example. |
| Clause 8 - Section 17D |
A person involved in a line is involved in any connected generation. The definition of connected generation already includes involvement in a line. The words 'a line is involved in' are therefore redundant and confusing and should be deleted. Consequently, the words or in selling should be replaced with the words also sells to make sense of the clause. |
Meridian |
Connected generation does include involved in line |
Remove "involved in a line" from 17D(1)(a) |
| Clause 8 - Section 17D |
17D(2) and (3) refer to 'connected electricity business' which is not a defined term. Suggest a definition is added cross-referring 17D(1) or 'who carry on the connected electricity business' replaced with 'to whom this section 17D applies'. |
Meridian |
Agree |
Define connected electricity business as those businesses to whom 17D(1) applies. |
| Clause 8 - Section 17D |
The words "involved in a line" in proposed section 17D(1)(a) are redundant, as "connected generation" is defined as including involvement in a line. Orion submits that the beginning of 17D(1)(a) should instead read "a person is involved in any connected generation". |
Orion |
Connected generation does include involved in line |
Remove "involved in a line" from 17D(1)(a) |
| Clause 8 - Section 17D |
Proposed sections 17D(2) and (3) refer to "connected electricity businesses". Orion notes that this term is not defined in either the draft Bill, or the EIRA. It submits that a definition be inserted into the draft Bill. "Connected electricity businesses" could be defined as meaning those businesses to whom section 17D(1) applies. |
Orion |
Agree |
Define connected electricity business as those businesses to whom 17D(1) applies. |
| Clause 8 - Section 17D |
A workable solution to give community access to the significant benefits of distributors owning and operating non-renewable generators, while also overcoming the Government's concern that distributor should not be able to enter the retail market is that distributors should be subject to an annual MWh (energy) cap rather than a MWh (capacity) cap. This would enable distributors to embed peaking plant to run for a limited number of hours in a year when loads on the distributor's network are high. This limit would prevent distributors competing for retail customers, who naturally require 24 hour - 365 day service. |
Orion |
If 10MW cap redefined as MWh cap to allow for peaking plant then: 1) Commerce Commission would need to monitor to ensure 10MW threshold not exceeded in any given year. Would lead to high compliance costs for lines companies reporting. 2) Lines companies may run risk of exceeding MWh cap in an emergency situation and failing to comply with arms length rules. 3) Will need to redefine selling cap for corporate separation/arms length rules to ensure based on actual output also rather than nominal output, while retaining nominal for ownership separation threshold. Once again, increased costs for lines companies reporting on 2 sets of selling statistics. |
No change |
| Clause 8 - Section 17D (Raising threshold) |
Recommend an even stronger relaxation of the arms length rule as a major barrier, in particular for small lines companies, to invest in generation. To comply with the arms-length rule and separation of companies is likely to put further strain on their resource pools. Additionally, negative effects may evolve by the suggested change from the 5MW or 2% threshold to a 10MW limit without percentage restriction. This might prove adversarial for some lines companies with generation which under the new regulation will have to comply with the separation of business and arms-length rules. |
Eastland |
A percentage threshold favours larger lines companies over smaller ones as face lower costs for corporate separation/arms length rules. |
No change |
| Clause 8 - Section 17D (Raising threshold) |
The 10MW threshold for corporate separation should be changed to the lower of 10MW or 5% of maximum demand. If the Government wants to ensure that the threshold is not reduced for small ELBs from that currently in EIRA (2MW) it could consider altering this recommendation to a cap of the lower of 10MW or 25% of maximum demand. 25% of maximum demand would be at least 2MW.The proposed change in threshold for exemption will reward small ELBs relative to larger ELBs. Buller Electricity (Max demand 7.8MW) will effectively be exempt from EIRA. |
Mighty River |
Threshold is currently 5MW, rather than 2MW. As above, if lower percentage threshold for smaller lines companies, are being penalised for being smaller size - will face higher costs for same MW output. |
No change |
| Clause 8 - Section 17D (Raising threshold) |
The draft Bill proposes to remove the current percentage threshold. This would have the practical effect of lowering the threshold for compliance with the arms length rules and corporate separation lines for companies such as Orion. Suggested solution is that distributors should be subject to an annual MWh (energy) cap, rather than a MW (capacity) cap. The status quo is that Vector, PowerCo and Orion can generate 42MW, 14MW and 12MW respectively without needing to comply with the arms length rules. |
Orion |
Percentage threshold favours larger lines companies over smaller ones as face lower costs for corporate separation/arms length rules compliance. |
No change |
| Clause 8 - Section 17D (Raising threshold) |
Clause 17D provides no percentage cap as an alternative to 10 MW. This may mean in the situation where 2% is greater than 10 MW that the 10 MW is more restrictive. |
Powerco |
Percentage threshold favours larger lines companies over smaller ones as face lower costs for corporate separation/arms length rules compliance. |
No change |
| Clause 8 - Section 17E |
17D and 17E are not cumulative, meaning if a person has 10MW of connected generation and 10MW of grid-connected but 'local' generation they will not have to comply with corporate separation and arms length rules. Suggest using 'qualifying generation' as in 17C(2), move definition to interpretation section and redraft 17D 'This clause applies if a person's qualifying generation is more than 10MW' |
Meridian |
17D and 17E together should add up to 10MW - should not be able to have 10MW under each category |
Redraft 17D so that is cumulative |
| Clause 8 - Section 17E |
If clause 17E is not deleted as suggested, requires similar amendments as mentioned for 17D(2) and (3) |
Meridian |
See above |
17E deleted and included as part of 17D |
| Clause 10 - Section 19(1) |
New sub-paragraphs (gb), (gc), (gd) do not grammatically flow from Clause 19(1) of the Act. Further, the other current sub-clauses subparagraphs in 19(1) list types of business involvements, whereas the proposed new subparagraphs (gb), (gc) and (gd) are intended to exclude certain types of generation. The draft Bill would be more coherent if the proposed new subparagraphs were placed in a separate sub-clause. |
Meridian |
Agree |
Add 'that person is involved in' before the word 'generation' in each case. |
| Clause 10 - Section 19(1) |
The wording of new clauses 19(1)(gb) - (gd) does not follow from the opening part of the existing 19(1). |
Mighty River |
Agree |
Add 'that person is involved in' before the word 'generation' in each case. |
| Clause 10 - Section 19(1) |
Clause 10(2) of the draft Bill proposes the insertion of sub-paragraphs to section 19(1) of the EIRA. That section reads "…no account is to be taken of a person's business, or involvement or interest in a business if-". The proposed sub-paragraphs do not make sense when following on from that wording. |
Orion |
Agree |
Add 'that person is involved in' before the word 'generation' in each case. |
| Clause 10 - Section 19(1A) |
Clause 19(1A) (d) should include 'or for the consumption of its associates' which is currently part of the equivalent section in the Act (section 5(2) (b)). |
Meridian |
Agree - would retain consistency with old 5(2)(b) |
Add text to 19(1A)(d) |
| Clause 10 - Section 19(1A) |
Proposed section 19(1A)(d) should include "or for the consumption of its associates", as this wording is currently included in section 4(2)(b) of the EIRA, which refers to the same exclusion. |
Orion |
Agree - would retain consistency with old 5(2)(b) |
Add text to 19(1A)(d) |
| Clause 17 - Section 70A |
Every person who sells electricity to connected customers within a local network: within a local network is redundant. |
Meridian |
Agree |
Delete within local network area |
| Clause 17 - Section 70A |
The words "within a local network" in proposed section 70A are redundant. Under the draft Bill, "connected customers" will be within a company's local network. |
Orion |
agree |
Delete |
| Clause 17 - Section 70B |
Rule in line 1 of sub-clause (1) should be rules. |
Meridian |
Agree |
Change |
| Clause 17 - Section 70B |
Proposed section 70B(1) should read "rules", rather than "rule". |
Orion |
agree |
Change |
| Clause 17 - Disclosure |
It is essential the various information disclosure requirements in terms of the Commerce Act s57T will remain intact and that the Commerce Commission has adequate resources to enforce compliance. In particular the implementation of the arm's length requirements in terms of transfer payments (refer paragraph 3.1.1 of the Electricity Information Disclosure Handbook, published by the Commerce Commission 31 March 2004 as part of the Commerce Act (Electricity Information Disclosure requirements) Notice 2004). The Commerce Commission will have to increase surveillance of electricity line businesses if the Bill is passed to cover new risks. |
MEUG |
It is intended these requirements will remain in place. |
No change |
| Exemptions - Section 81 |
The Commission should be expressly required to take into account the purpose statement when considering an exemption application under section 81. |
Vector |
Commerce Commission are already required to make exemptions based on the purposes of the Act being facilitated |
No change |
| Exemptions - Section 81 |
Section 81 should be amended to include statutory criteria to be taken into account by the Commission when considering an application. These criteria should largely follow the factors referred to by the Commission in the Unison and Eastland exemption applications, the difference being that these would be statutory mandatory relevant considerations. (It is also of note that the Commission felt unable to consider wider factors in the Eastland application because of the narrow purpose statement). |
Vector |
Commerce Commission practice guidelines take these issues into account. Ministry does not feel that there is requirement at present to specify these in legislation. |
No change |
| Exemptions - Section 81 |
In relation to time frames, Vector submits that it is unacceptable for the Commission to be able to take as long as it wishes to consider applications. Timeliness is a core aspect of any regulatory regime and is particularly important when distributors are considering the optimal mix of increased distribution network capacity versus distributed generation. Any additional costs from requiring applications to be addressed within a fixed period would be justified by increased investment. |
Vector |
Issue has been considered in the past by in discussions between MED and Commerce Commission. Intermittent and low frequency of applications means that Commerce Commission does not carry dedicated staff for applications. Keeping to strict legislated timetable the Commission has advised would require them to reserve dedicated staff which would add considerably to cost of process. |
No change |
| Exemptions - Section 81 |
Suggest that a statutory time frame for dealing with EIRA Act applications should (at the very least) be set to achieve parity with clearance applications under the Commerce Act 1986. |
Russel Mcveigh |
Issue has been considered in the past by in discussions between MED and Commerce Commission. Intermittent and low frequency of applications means that Commerce Commission does not carry dedicated staff for applications. Keeping to strict legislated timetable the Commission has advised would require them to reserve dedicated staff which would add considerably to cost of process. |
No Change |
| Clause 23 - Arms length rules |
The Papers clearly anticipate an accounting separation regime in addition to the existing information disclosure requirements. It is not clear to Meridian where such accounting separation is or will be imposed, or what it will entail. The draft Bill does not provide for accounting separation, nor are such requirements present in the existing Act (which imposes full corporate separation). It would be useful for MED to progress its consultation on accounting separation regulation at the same time as the consultation on the draft Bill. |
Meridian |
If accounting separation introduced would be a new requirement under arms length rules. There is currently no requirement for accounting separation - purpose would be covered by information disclosure and thresholds regime, and corporate separation requirements. |
No change |
| Clause 23 - Arms length rules |
Rule 8 - it is not clear what 'and may direct or supervise the management of the whole or a substantial part of the business and affairs of business B' adds - ordinary legal meaning of 'director' should suffice. Additional wording may lead to disputes. |
Meridian |
Agree |
delete words "and may direct or supervise the management of the whole, or a substantial part of the business and affairs of business B" and word otherwise" |
| Clause 23 - Arms length rules |
Rule 9 'other than a director of business A' suggests that directors may not do the things suggested below 30MW. Directors are covered by new rule 8 and would be less confusing if rule 9 was silent on them. |
Meridian |
Definition of manager includes director. Rule 9 intends that directors who are not managers should not be caught by this clause . |
Delete "other than a director" from rule. |
| Clause 23 - Arms length rules |
The confusion stems from current definition of 'manager'. Having a definition that includes a director means that drafting is confusing when permitting cross directorships but excluding common management. Suggest amending definition of manager and having separate definition for director. |
Meridian |
View is that difficult to specify activities of each |
No change |
| Clause 23 - Arms length rules |
30MW threshold only takes into account as defined in 17A. Should be calculated on same basis as 10MW threshold in 17D and E (subject to Meridian's comments on those clauses) |
Meridian |
Should include generation under 17A and 17B in 30MW threshold |
Change to include 17B |
| Clause 23 - Arms length rules |
The reference to "other than a director" in proposed new rule 9 makes that rule read as though directors may have the listed involvements. However, directors are dealt with under new rule 8; rule 9 relates to managers and should not mention directors. |
Orion |
Directors are dealt with under rule 8. Rule 9 relates to managers and not directors. |
Delete "other than a director" from rule. |
| Clause 23 - Arms length rules |
In proposed new rule 8, the words "and may direct or supervise the management of the whole, or a substantial part of the business and affairs of business B" make that rule unduly complex. Orion suggests that those words, and the word "otherwise", are deleted. That would leave the main provision (that a director of business A may be a director of business B), followed by a list of the conduct which the director must not carry on. |
Orion |
Agree |
delete words "and may direct or supervise the management of the whole, or a substantial part of the business and affairs of business B" and word otherwise" |
| Clause 23 - Arms length rules |
The definition of "manager" should be amended, and a separate definition of "director" inserted, to remedy potential confusion resulting from permitting cross directorships but excluding common management (over the 30 MW threshold). |
Orion |
View is that difficult to specify activities of each |
No change |
| Clause 23 - Arms length rules |
Concern that the Bill requires only 1 independent Director of a commonly owned line and supply businesses. This is a significant step change from the status
quo whereby individual Directors must seek an exemption from the Commerce Commission. MEUG suggest that given the risks to the public from the monopolies
exploiting their market power that a more measured approach is appropriate whereby common Directors are allowed provided a majority of Directors on the supply
business are independent. |
MEUG |
Agreed policy was for minimum of one independent director. Majority of independent directors would increase compliance cost for smaller trusts. |
No change |
| Clause 23 - Arms length rules |
Vector strongly submits that the governance restrictions should be relaxed to permit cross-directors, both executive and non-executive, without the further restrictions outlined in the June 2006 Cabinet paper and minute. |
Vector |
Relaxing further would go beyond agreed policy. Cabinet policy decisions have been made to retain these arms length requirements. |
No change |
| Clause 23 - Arms length rules |
One independent director (regardless of board size) is a pretence of independence, and we dispute that this is 'consistent' with Securities Commission and Stock Exchange guidelines for best practice for company governance. We disagree with the suggestion in the Cabinet paper that requiring at least half (if not a majority) of
independent directors would be too onerous. Meridian therefore suggests that:
.1 the arms-length rules are not relaxed. A more appropriate threshold for prohibiting a common manager is the current threshold of 10MW (a couple of small hydro stations) rather than the proposed 30MW; or
.2 if the corporate separation rules are relaxed, that, at least half of directors on the board are independent (not just one); and
.3 the arms-length and corporate separation rules are not relaxed for generation or retail investment within the lines company's local network area. |
Meridian |
Agreed policy was for one minimum of independent directors. Requiring a majority of independent directors would increase compliance cost for smaller trusts. |
No change |
| Clause 23 - Arms length rules |
Meridian is concerned that the proposed amendments do not consider the information advantages that lines companies have when retailing within their local network area. Meridian therefore suggests that it is more consistent with the current proposals that if lines companies are precluded from retailing to customers residing in their own network area (but may retail outside the network area without restriction). |
Meridian |
If this is an issue, can regulate using power under section 172D(1)(15) or (17) of the Electricity Act 1992. |
No change at this stage |
| Clause 23 - Arms length rules |
Vector strongly submits that the 30 MW cap on shared managers should be removed or, at least, raised to 50MW or 20% of network demand. This is essential to promote investment, particularly in peak load generation where tight operational coordination is required |
Vector |
Extending threshold above 30 MW would go beyond agreed policy. 30 MW provides a reasonable trade-off between compliance costs and competition concerns. |
No change |
| Clause 23 - Arms length rules |
ENA submits that the threshold of generation of 30 MW above which management has to be separate appears arbitrary and unnecessarily different from the capacity threshold of 50 MW or 20% of network load for non-renewable generation. ENA appreciates that the Government may hold the view that a lines company should not be able to invest in and manage substantial generation such as a 380 MW CCGT. However, setting this threshold at 30MW is unnecessarily low and will continue to form a barrier to a lines company wishing to build a plant that is of an economic size whether it is renewable or non-renewable. |
ENA |
Extending threshold above 30 MW would go beyond agreed policy. 30 MW provides a reasonable trade-off between compliance costs and competition concerns. |
No change |
| Clause 23 - Arms length rules |
We consider that the implementation of the policy could be further improved by changing the 30MW limit in Schedule 1, 9 to align with the numbers in 17A, i.e. 50MW or 20% of the maximum demand (whichever is the greater). |
WEL networks |
Extending threshold above 30 MW would go beyond agreed policy. 30 MW provides a reasonable trade-off between compliance costs and competition concerns. |
No change |
| Clause 23 - Arms length rules |
MainPower agrees with raising the threshold limit. However, for consistency across generation types, MainPower believes the threshold limit should be changed to the greater of 30MW or a turnover of $60m. |
Mainpower |
$60 million was an example to illustrate retail value of 30 MW, rather than a requirement |
No change |
| Clause 23 - Arms length rules |
Ability to use the same manager to mange energy/generation business up to 30 MW. Some clarity could be added stating that 30 MW refers to connected generation and not demand. |
Network Waitaki |
Note that is 30MW of connected generation in the heading to clause 9 of Schedule 1 |
No change |
| Clause 24 - Consequential Amendments - Commerce Act |
The draft Bill proposes to amend the Commerce Act so that "electricity business", "electricity lines business" and "involved" have the meanings as they did in the EIRA prior to the enactment of the Electricity (Miscellaneous Matters) Amendment Act 2007. The Commerce Act should not cross-refer to legislation that is no longer in force. Instead, the relevant definitions should be set out in full. |
Orion |
Agree |
Fix definitions |
| Clause 24 - Consequential Amendments - Commerce Act |
The reference to the Electricity Industry Reform Act "1988" should read "1998". |
Orion |
Agree |
Fix |
| Clause 24 - Consequential Amendments - Commerce Act |
The draft Bill amends the Commerce Act so that electricity business, electricity lines business, and involved have the same meanings as they did in the Electricity Industry Reform Act 1988 [a typo] before the enactment of the Electricity (Miscellaneous Matters) Amendment Act 2007. This should not cross-refer to legislation that is no longer in force, and the definitions should be set out in full. |
Meridian |
Agree |
Fix definitions |
| Consequential Amendments - Electricity Act |
The draft bill needs to make other necessary consequential amendments. For instance, section 4A of the Electricity Act provides that - The Minister of Energy may declare an electricity supply business to be an 'electricity operator' if the Minister is satisfied 'that a declaration is necessary to enable the person to carry on all or any of the activities referred to in section 4(2) of the EIRA, and defines 'electricity supply business' by a cross reference to section 5 of the EIRA. |
Meridian |
Agree |
Add update for section 4A of EA for electricity supply business definition |
| Consequential Amendments - Electricity Act |
Section 4A of the Electricity Act provides that the Minister of Energy may declare an electricity supply business to be an "electricity operator" if the Minister is satisfied that a declaration is necessary to enable the person to carry on all or any of the activities referred to in section 4(2) of the EIRA. Section 4 of the EIRA would be repealed by clause 6 of the draft Bill. Section 4A of the Electricity Act also defines "electricity supply business" by cross reference to section 5 of the EIRA, which would be repealed under clause 6 of the draft Bill. |
Orion |
Agree |
Amend 4A(1)(a) and 4A(2) of EA to refer to new section 7(?) and for definition of supply business. |
| Review period |
MainPower suggests a mandated review period (say 3 years), for officials to review the amount of generation investment by Lines Companies and gauge the effectiveness of the Bill in general. |
Mainpower |
Policy can be reviewed at anytime without requirement. |
No change |
| proposed new clause 26 - s5(2)(e) |
TLC considers that the new legislation should set a catch-all transitional provision to preserve other involvements lawfully acquired through existing statutory exemptions into the future (whether or not it is the deliberate intent of the Bill to render some of the current exceptions or exemptions unlawful with respect to future schemes. |
Russel Mcveigh - TLC |
TLC suggests inserting a new clause 26 for saving of exemptions. New clause 25 on transition provisions provides for exemption to remain lawful as if Act had not been enacted. |
No Change |