4350 NEW ZEALAND GAZETTE No. 166

Annual Report

35. The Governance Board should provide a report annually to the Minister of Energy on its activities and in particular on whether and to what extent the outcomes the Government has specified in this Government Policy Statement are being delivered effectively. The first such report is expected in October 2001.

36. The Minister of Energy will table this report in Parliament. The Government will propose legislation directing the Controller and Auditor-General (CAG) and the Parliamentary Commissioner for the Environment (PCE) to report to Parliament annually. The CAG would provide assurance to Parliament that the Governance Board’s report is soundly based while PCE would report on environmental sustainability issues.

Status of Existing Government Policy and Section 26 Statements

37. The existing Government Policy Statement “Management of Dry-Year Risk”, last issued on 15 December 1998, is reissued as an attachment to this Statement. For the avoidance of doubt, all other previous Government Policy Statements on electricity market issues are supplanted by this Policy Statement.

38. Previous Governments have issued three Statements to the Commerce Commission under section 26 of the Commerce Act 1986. These are:

• Electricity Transmission (20 December 1994);
• Development of a Competitive Wholesale Electricity Market (12 December 1995); and
• Market Power in the Electricity Sector (23 December 1998).

These Statements will be withdrawn. A new section 26 Statement will be issued advising the Commerce Commission that this Government Policy Statement is a statement of the Government’s economic policies within the meaning of that section.

PETE HODGSON, Minister of Energy.

Attachments:

One: Objectives and Principles for the Provision of Transmission Services.

Two: Management of Electricity Supply Risk.

ATTACHMENT 1

OBJECTIVES AND PRINCIPLES FOR THE PROVISION OF TRANSMISSION SERVICES

This document is issued as an attachment to the Government Policy Statement entitled “Further Development of New Zealand’s Electricity Industry”, dated December 2000.

Background

1. The way in which transmission services are provided and priced impacts directly and indirectly on all parts of the electricity industry, the economy and the environment, including:

• the welfare of domestic consumers and the commercial viability and competitiveness of businesses;
• competition among and investment by suppliers of electricity services, including traditional suppliers such as electricity generators and alternative suppliers such as demand-side management including energy efficiency and load management, co-generation, and distributed generation; and
• the quality and sustainability of the environment.

2. Transmission has strong natural monopoly characteristics, which makes it important that the Government set out its policy expectations as to how transmission services should be provided and priced and how Transpower should operate. For example, poorly designed policies may encourage inefficient investment in generation, which would waste scarce capital resources and harm the environment.

3. The Government’s expectations in this regard are specified in the objectives and principles for the provision and pricing of transmission services set out in this Policy Statement.

Objectives for the Provision of Transmission Services

4. The Government’s objectives for the provision of transmission services are that:

• the services are provided in a manner consistent with the Government’s policy objective – to ensure that electricity is delivered in an efficient, fair, reliable and environmentally sustainable manner to all classes of consumer;
• the services should be provided at the standards of quality and security required by grid users through a process of agreement with those users, or the Electricity Governance Board (‘the Governance Board’) on behalf of users;
• the efficiency of transmission services should be continuously improved so as to produce the services users want at least cost; and
• the services are priced in a manner that:
  • is transparent;
  • fully reflects their costs including risk;
  • facilitates nationally efficient supply, delivery and use of electricity;
  • promotes efficient use of Transpower’s resources; and
  • promotes nationally efficient use of transmission services by grid users and so facilitates efficient resource use.

Responsibilities of Transpower

5. Transpower’s Board is responsible for determining Transpower’s Statement of Corporate Intent (SCI) in consultation with shareholding Ministers on behalf of the Government as owner. The Government expects that the SCI will be consistent with the Government’s objectives (see above) for the provision of transmission services.

6. Transpower’s SCI will also set the key determinants of the overall revenue requirements for Transpower. As owner of Transpower, the Government expects Transpower to recover the full economic costs of its services, including a fair return to shareholders based on commercially acceptable principles for their investment in the transmission system.