4352

NEW ZEALAND GAZETTE

No. 166

ATTACHMENT 2

MANAGEMENT OF ELECTRICITY SUPPLY RISK

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

“Dry-year” Risk

1. A key risk to the security of electricity supply in New Zealand is climatic uncertainty. We rely heavily on hydro generation and New Zealand has limited water storage capacity. Unusually low rainfall, or ‘dry years’, can create electricity shortages. The economy will continue to face this risk for the foreseeable future.

Government’s Objectives

2. The Government’s objective is to provide a framework which will ensure that dry-year and other supply risks are managed prudently at least cost to the economy.

3. Previous governments’ Policy Statements concerning the management of dry-year risk have emphasised:

   • the expectation that electricity industry participants should ensure that they take responsibility for managing dry-year and other supply risks; and
   • that the Government will not step in to protect those who fail to provide adequate protection.

4. If industry participants did not take such action, and a government stepped in, the likelihood of future supply shortages would increase as a result of weaker incentives on buyers and sellers of electricity to arrange appropriate risk management strategies.

5. It is timely to reiterate the current Government’s expectations of industry participants and the principles that should be observed in managing electricity supply risks.

Expectations and Principles

(a) Dry-year and other supply risks should be managed in such a way as to minimise overall costs to the economy.

(b) Responsibility for managing risks relating to supply rests with market participants.

(c) Generators are responsible for providing protection against supply risk at a quality and quantity that is demanded by their customers and established in contracts.

(d) Spot and contract prices in the wholesale market should signal the changing risks of a dry year.

(e) A range of mechanisms is available to industry participants to manage dry-year and other supply risks, within and outside the wholesale market.

(f) The trade-off between the costs of supply and protection measures should be made by those at risk.

(g) The wholesale market rules should not be biased against any particular protection mechanism.

(h) The Government is not expected to step in to protect wholesale buyers who fail to put in place adequate protection arrangements.

6. The Government expects that retailers will communicate to their customers the level of service (including the security of supply) that they are offering. This is so that consumers will have the information they need to make informed choices.

The Government Policy Statement ends here.

Revocation

The statement of Government policy entitled “Statement to the Commerce Commission of the Economic Policy of the Government: Electricity Transmission” transmitted by the then Minister of Commerce, Philip Burdon, on 20 December 1994 and published in the New Zealand Gazette of 21 December 1994 at pages 4466–4467 is hereby revoked.

The statement of Government policy entitled “Statement to the Commerce Commission of the Economic Policy of the Government: Development of a Competitive Wholesale Electricity Market” transmitted by the then Minister of Commerce, Philip Burdon, on 12 December 1995 and published in the New Zealand Gazette of 14 December 1995 at pages 4769–4771 is hereby revoked.

The statement of Government policy entitled “Statement to the Commerce Commission of the Economic Policy of the Government: Market Power in the Electricity Sector” transmitted by the then Minister for Enterprise and Commerce, Max Bradford, on 21 December 1998 and published in the New Zealand Gazette of 21 January 1999 at pages 121–122 is hereby revoked.

Signed at Wellington this 8th day of December 2000.

PAUL SWAIN, Minister of Commerce.

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Education

Education Act 1989

Closure of Sydenham School (3548), Christchurch

Pursuant to section 154 (1) of the Education Act 1989, I hereby declare that

Sydenham School (3548), Christchurch

will close on 31 December 2000, and will cease to be established on that day.

Dated at Wellington this 11th day of December 2000.

TREVOR MALLARD, Minister of Education.

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Closure of Waihou School (2051), Te Aroha

Pursuant to section 154 of the Education Act 1989, I hereby declare that

Waihou School (2051), Te Aroha

will close on 15 March 2001, and will cease to be established on that day.

Dated at Wellington this 6th day of December 2000.

TREVOR MALLARD, Minister of Education.

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