Terms of Reference
[ Last Updated 15 February 2006 ]
3 February 2000
Contents
Background
1. Electricity is a necessity. The performance of our economy and the welfare of New Zealanders require our electricity industry to operate efficiently and effectively. Businesses, including land-based industries, need reliable low-cost electricity to remain competitive and households need reliable low-cost electricity to enhance their quality of life.
2. There have been many changes to the structure of the electricity industry since the mid-1980s. Recent reforms include the split of ECNZ into three state-owned enterprises and the requirement that local power companies separate the ownership of their line and energy businesses.
Ministerial Inquiry
3. The Government's objective is to ensure that electricity is delivered in an efficient, reliable and environmentally sustainable manner to all classes of consumer.
4. The Government considers that an Inquiry is now required to examine whether the current regulatory arrangements for the transmission, distribution, wholesale and retail sectors are best suited to achieving this objective. It has therefore decided to establish a Ministerial Inquiry to explore these issues.
Terms of Reference
5. The Inquiry shall:
- Assess the extent to which the current regulatory regime meets the Government's objective for electricity, with a focus on the matters for particular comment listed below.
- If the current arrangements do not achieve the Government's objective for electricity, make recommendations for any amendments to policy and the regulatory framework that will assist in achieving the Government's objective.
- In developing recommendations, assess the costs and benefits of key options by reference to the Government's objective.
- In making this assessment, take due regard of:
- New Zealand's progress to date in the provision of electricity services, including by comparison with progress made in other relevant countries;
- regulatory developments in other countries;
- relevant theoretical perspectives on the regulation of the electricity industry;
- the impact of new technologies;
- the impact of any options on investment in electricity infrastructure and services;
- environmental impacts;
- any factors specific to the New Zealand regulatory framework;
- any proposals for industry self-regulation;
- any proposals for changes to relevant legislation (such as the Commerce Act).
- Comment on the detailed implementation requirements of any recommendations, for example, any required legislation or regulations.
Matters for Particular Comment
6. In responding to its terms of reference, the Ministerial Inquiry shall make particular comment on the following issues:
Transmission and Distribution
- whether changes are required to the regulatory regime for transmission and distribution to ensure efficient prices and service delivery;
- whether asset valuations and efficiency assessments should form part of the regulatory regime;
- whether the existing information disclosure regulations provide adequate and reliable information for assessing the performance of transmission and distribution companies;
- whether the present incentives for ensuring system security in transmission and distribution are appropriate.;
Wholesale Market
- whether the efficiency of the wholesale market is jeopardised by its voluntary nature and/or the extent of vertical integration between generation and retail;
- whether market governance should allow for greater participation by smaller players and end users;
- whether opportunities for demand-side participation in the wholesale market should be increased;
Retail
- whether there are barriers to entry by new retailers that restrict the development of retail competition;
- whether there is a need for the Government to facilitate or require the development of standard arrangements between retailers for consumer switching, and/or standard contracts between retailers and distribution line owners for the use of distribution networks;
- whether the Government should constrain the use of fixed charges, taking into account economic efficiency, energy efficiency, interfuel competition, and equity considerations;
- whether there is a need for the Government to facilitate or require the development of standard arrangements between retailers and consumers to promote consumers' interests.
Process
7. The Inquiry team will:
- obtain relevant expertise, including consultancy and secretariat services, to assist it to examine issues covered by the Inquiry;
- examine first-hand the experiences and regulatory arrangements of selected overseas countries which have introduced competition into their electricity industries and which have similar institutional frameworks to New Zealand;
- invite public submissions and hold public hearings on submissions; and
- report regularly to the Minister of Energy on progress with the Inquiry.
Reporting Date
8. The Inquiry shall report to the Minister of Energy by 12 June 2000.
Back to Top