Our Gerry-built power future

Gerry Brownlee – splendid fellow – is earning his keep as Energy and Resources Minister by thinking long and hard about his portfolio, and about our increasingly tatty electricity network.

He is resisting the urge to draw hasty conclusions, but he’s smart enough to be thinking about finding someone else to help him think.

And so – says a media statement today – he’s considering a Ministerial Working Party to reshape the regulatory functions of the electricity industry.

About time. Personally, Alf wouldn’t have buggered around and would have pulled the plug on the Electricity Commission by now.

But back to Brownlee, who made his announcement in a speech to the national power conference in Auckland.

Fair to say, the power stayed on for long enough for him to read the speech from start to finish.

He talked about Government plans for increasing transmission investment, improving security of supply, upholding our environmental responsibilities, the New Zealand energy strategy, and energy efficiency.

He’s encouraged by Transpower’s $3.8 billion programme of investment planned for the next ten years.

To help push it along –

the government believes that disentangling the regulatory overlap between Transpower, the Electricity Commission and the Commerce Commission is desirable.

We know that getting it right will take some time.

However the Government is taking some interim steps to ensure transmission investment can happen more quickly.

First step: Cabinet is considering a new draft Government Policy Statement on Electricity Governance.

But we’ve got to think of the longer term.

Sure, National’s 2008 election policy promised a regulatory and governance review, to reduce duplication, minimise the costs of regulation, and improve the investment environment.

But Brownlee is impressed by a report commissioned by Business NZ that examines the key issues.

Some of its recommendations require more thought, says Brownlee, such as the idea that industry participants would be more effective at designing efficient wholesale and retail market trading rules.

I think the wild-west days of 1998 to 2003 demonstrate the perils of complete industry self-governance reliant on voluntary action.

After reading the Business NZ report, nevertheless, Brownlee was struck by the absurdity of calling for a review of duplication of activity in the electricity sector – when any further review would in fact duplicate the Business NZ report.

Hence he is considering (but only considering) a Ministerial Working Party to take the Business NZ report as a working document that may form the basis for recommendations on future regulatory and governance arrangements.

The working party would also be asked to consider the issue of affordability and consider how we can get off the escalator of price hikes that we Nats complain have typified the last five years.

So when will things happen?

While a decision to proceed down this line has yet to be made, any working party would be expected to report in the latter half of the year.

The Commerce Commission meanwhile is nearing completion of an investigation into alleged breaches of market power by electricity generators.

That investigation involves a detailed assessment of whether electricity market participants have substantial market power, and whether they have used such power for an anti-competitive purpose.

That report will be extremely interesting to receive and my understanding is that it will be released shortly.

I want to say very clearly that the Government will not hesitate to act if the report finds significant shortcomings in the operation of the market.

There’s plenty more in the speech.

Suffice to say, Brownlee is promising New Zealand has an extremely bright energy future ahead of it.

But not if the bloody power keeps going out, as it has been doing too often in Auckland in recent times.

Nor will the future be too bright if power prices rise to the point where some people can’t afford to turn the lights on.

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