| Q. | Why is it necessary to hold an Inquiry into the electricity industry? |
| A. | The Government has listened to consumers when they complained about electricity prices and the accuracy of their bills. We have also listened to the electricity industries who were critical of the previous Government’s attempt to rush through urgent legislation which was not properly considered. |
| So we need a proper assessment of what the problems are, along with concrete advice on how to go about dealing with those problems. The Inquiry will provide this assessment. |
| Q. | What is the Government’s objective for the electricity industry? |
| A. | The Government wants to ensure that we have an electricity industry that delivers electricity in an efficient, reliable and environmentally sustainable manner to all classes of consumer. |
| The Government will be satisfied when consumers, when they get their monthly bill, can say "yes, that’s a fair deal". |
| Q. | What will the Inquiry cover? |
| A. | The Inquiry will assess the extent to which the current regulatory regime for electricity transmission, distribution, wholesaling and retailing meets the Government’s objective for the industry (described above). The Terms of Reference for the Inquiry are being released today. |
| Q. | Why do the Terms of Reference for the Inquiry not explicitly include electricity generation issues? |
| A. | Including generation issues such as dry year security and environmental protection would expand the Inquiry’s scope very significantly and would jeopardise an early report back. I want an early report back because if legislation is required I want it passed this year so that consumers benefit as soon as possible. I will commission work on generation separately as necessary. |
| Q. | Who will run the Inquiry? |
| A. | A three person team has been appointed to undertake the Inquiry. |
| The Government has been fortunate in securing the services of a very impressive team, chaired by Hon David Caygill, a former Minister of Trade and Industry and Minister of Finance, who is now employed as a senior lawyer focussing on public policy issues. |
| Dr Susan Wakefield, who was chairman of the Commerce Commission from 1989 to 1994 and is highly respected for her understanding of competition policy, will also join the panel. |
| The third panel member is Stephen Kelly, who has many years experience working on public utility issues in the UK and Australia. He will bring to the panel valuable hands-on experience in utility regulation combined with an international perspective. |
| Q. | When will the results of the Inquiry be known? |
| A. | The Inquiry will begin work immediately. It has been asked to report to me by 12 June. It is expected that the Inquiry report will be made available to the public shortly thereafter. |
| Q. | What happens then? |
| A. | If the Inquiry concludes that changes to current policy settings and the regulatory framework are needed, it is charged with making detailed recommendations as to what should be done. The Government will then need to consider the panel’s recommended changes and decide how best to proceed. |
| Q. | Does the public have any role in the Inquiry? |
| A. | The Inquiry will be seeking submissions from interested parties. Consumers and others can make written submissions. The Inquiry will also hold public hearings in main centres. The Inquiry proposes to release a discussion paper in the near future to assist people making submissions. Details will be available on the Inquiry website www.electricityinquiry.govt.nz, next week. |
| Q. | What will the Inquiry cost? |
| A. | The budget for the Inquiry is $850,000 (excluding GST). A contribution of $250,000 will come from the existing Energy budget - $600,000 is new funding allocated by the Government. This is a small budget for such a major task. It includes all expenses for the Inquiry, including fees, premises, expert advice, costs of holding public hearings and travel. |
| Q. | Is the Inquiry going to use consultants? |
| A. | The Government’s expectation that use of consultants be kept to a minimum will be taken very seriously by the Inquiry, which will make as much use as possible of existing public service resources. However, given the tight timeframe for the Inquiry and the specialist nature of much of the material, the Inquiry will need to use expert advisers. |
| In particular, I have arranged for the panel to be assisted by Professor Stephen Littlechild, who is an internationally renowned expert on electricity regulatory issues. Until recently Professor Littlechild was the UK regulator for electricity. |
| Q. | Will the panel study overseas regimes? |
| A. | It is planned that the Inquiry panel will visit a small number of countries to obtain a first hand understanding of policies for the electricity industries which are being explored and introduced by countries grappling with the same problems as New Zealand. The trip will be tightly focussed. It will cover regulatory authorities, government departments, think tanks, and trade associations in Australia, USA, UK and Norway. |
| Q | Will the Inquiry deliver lower power prices for consumers? |
| A. | Unlike the previous Government, this Government is not going to rush through radical changes to the electricity industry with the promise of lower power prices. Lower power prices may result from the Inquiry, but the Government is most interested in ensuring that all consumers are dealt with fairly and get the best deal possible. |
| Q. | Does this Inquiry mean that electricity lines will be placed under price control? |
| A. | The Inquiry will not approve or establish the detailed prices that individual electricity companies charge to consumers. |
| The Government supports competition to keep prices down where this is feasible. However, if the Inquiry decides that detailed price controls are needed on those parts of the industry where competition is not likely, the Government will ensure that the additional work required is undertaken as quickly as possible. |
| The Government will await the outcome of the Inquiry before deciding what should happen to the Commerce (Controlled Goods or Services) Amendment Bill. This Bill, which was introduced by the previous Government but which has not progressed through Parliament, would place electricity lines under price control. |
| Q. | What about conflicts of interest involving panel members? |
| A. | Two of the panel members, Mr Caygill and Dr Wakefield, have existing interests or involvements in the industry. I have released details of the interests and steps for dealing with them. Mr Kelly, who is British and currently resident in Australia, does not have any interests in the New Zealand electricity industry. |
| Given New Zealand’s size, it is very difficult to find well qualified people to undertake an Inquiry of this nature who do not have some degree of involvement with the industry. |
| It should also be noted that the Inquiry will not decide Government policy. While it is expected that the panel will make recommendations to the Government, decisions rest with the Government, and implementation of those decisions will follow transparent accountability processes. This will include Select Committee consideration of any new legislation. The public will have further opportunities to make submissions at that point. |
| The Government regards the steps it has taken to deal with the conflicts of interest as a model to be followed for other Inquiries set up in the future. |