Letter to Hon David Caygill, Chair, Establishment Committee, Electricity Governance Establishment Project
[ Last Updated 20 February 2006 ]
7 December 2001
Dear Mr Caygill
Thank you for your letter of 31 October 2001 about progress to the end of October in establishing self-regulatory arrangements to meet the Government's expectations as set out in the Government Policy Statement (GPS).
I appreciate the ongoing progress and the commitment of the industry to deliver the outcomes the Government is looking for, and I note the extent of consumer involvement. In particular, I was pleased to receive the update and comment on progress with all the deliverables in the GPS, including those in which the Establishment Committee is not directly involved, and for the timetable and milestones for the transmission pricing methodology work. I note you anticipate making an early application to the Commerce Commission.
There are several areas of the work programme on which I wish to specifically comment, including some arising out of the events of the past winter.
Requirements in Government Policy Statement
I am looking for substantive progress now on each of the specific requirements set out in the GPS. Leaving some of them until the EGB is in place is not acceptable, given their importance to achieving the Government's overall objective for the electricity sector and the need to manage the risks of another dry year.
Nevertheless I accept that the Establishment Committee is focussed on establishing the EGB as quickly as possible and that some aspects of the GPS fall outside the scope of the work required for EGB establishment. I am aware, and you point out in your letter, that work is proceeding on most of the remaining issues in other fora.
My interest lies in outcomes, that is in ensuring work is progressing to meet the objectives set out in the guiding principles for the electricity industry as contained in the GPS. I am accordingly writing to the lead agency for each of the issues seeking their co-operation with progressing these issues, and seeking bi-monthly progress reports like those received from the Establishment Committee.
I would be grateful if you could continue to provide in your bi-monthly reports a full report on progress with all the issues for which the Establishment Committee has lead responsibility. I anticipate that you might use as a template for this report the format used on pages 6-8 of your 31 October letter. It is important however that the reports include specific forward looking timeframes and milestones.
I believe that the market overall would have worked better during the past winter had some of the reforms specified in the GPS been fully implemented (such as those relating to demand side participation in the market, and mechanisms to invest in the grid to relieve transmission constraints). It is therefore important that measures that impact on winter security be implemented prior to next winter as a precaution against the possibility of entering next winter with low lake levels.
The attached table sets out the GPS issues, the lead agency for each and the specific issues I would like completed well before next winter. Some of the issues in the table associated with winter security have completion dates that are during or after the winter (such as transmission pricing and grid development). These dates reflect work programmes underway. I nevertheless expect good progress to have been made, and significant milestones to have been reached on these issues, by the beginning of winter.
I would appreciate your advice on the possibility of the Establishment Committee's work on winter security issues being completed by the dates specified in the table. I am making similar requests in my letters to the other lead agencies.
Transmission Pricing Methodology
Thank you for the milestones towards completion of work on the transmission pricing methodology. I look forward to seeing progress against these milestones in your bi-monthly reports. I notice that the milestones do not coincide with the timetable of two monthly reports to me. Rather than impose additional reporting requirements, I would ask that you comment on progress in your bi-monthly reports and keep officials informed outside the bi-monthly timeframe if material issues arise between these reports.
Concluding Comments
I look forward to further advice on these issues in your next report, and in particular to your response to my request that work on many of these issues be completed well before the beginning of next winter.
Yours sincerely
Hon Pete Hodgson
Minister of Energy
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