536 NEW ZEALAND GAZETTE No. 18

The Government Policy Statement is set out below. Following the Government Policy Statement is a section revoking a previous section 26 statement.

GOVERNMENT POLICY STATEMENT—
FURTHER DEVELOPMENT OF NEW ZEALAND’S ELECTRICITY INDUSTRY

The Ministerial Inquiry into the Electricity Industry reported to the Minister of Energy on 12 June 2000.

A statement of Government policy was issued in December 2000 following consideration of the recommendations of the Inquiry. It supplanted previous statements of government policy on electricity.

Attachments to the statement deal with objectives and principles for the provision of transmission services, and management of electricity supply risk (“dry-year risk”).

This revised statement has been issued following a review of the way the electricity system functioned over the winter of 2001. Paragraph 15 of the December 2000 statement has been amended to require public disclosure of generator offers after 2 weeks (instead of 3 months).

Government’s policy objective for electricity

1. The Government’s overall objective is to ensure that electricity is delivered in an efficient, fair, reliable and environmentally sustainable manner to all classes of consumer.

2. To meet this objective, the Government favours industry solutions where possible, but is prepared to use regulatory solutions where necessary.

3. This Policy Statement sets out the Government’s expectations for industry action and its views on governance matters.

New self-regulatory arrangements: Guiding Principles

4. The Government wishes to see further evolution of self-regulatory arrangements.

5. The Government has established the following Guiding Principles for the evolution of these arrangements:

Guiding Principles for the electricity industry

The Government’s overall objective is to ensure that electricity is delivered in an efficient, fair, reliable and environmentally sustainable manner to all classes of consumer. Industry arrangements should promote the satisfaction of consumers’ electricity requirements in a manner which is least-cost to the economy as a whole and is consistent with sustainable development.

Consistent with this overall objective, the Government is seeking the following specific outcomes:

(a) energy and other resources are used efficiently and, in particular, hydro spill is minimised;

(b) risks relating to security of supply, in particular the risks of dry years and inadequate transmission and distribution security, are properly and efficiently managed;

(c) the full costs of producing and transporting each additional unit of electricity are signalled so that investors and consumers can make decisions consistent with obtaining the most value from electricity;

(d) delivered electricity costs and prices are subject to sustained downward pressure;

(e) the quality of electricity services, and in particular trade-offs between quality and price, should as far as possible reflect customers’ preferences;

(f) transmission losses and constraints are signalled to ensure that overall costs to the economy, including the costs of insufficient competition in local regions, are minimised; and

(g) greenhouse gas emissions are minimised.

To meet these objectives and outcomes, an Electricity Governance Board is to ensure that rules are developed as set out in this Government Policy Statement. The rules are to be consistent with these Guiding Principles. In particular, the rules are to:

(h) promote enhanced competition wherever possible and, where it is not, seek outcomes that mirror as far as possible those that would apply in competitive markets;

(i) facilitate and promote active demand-side participation;

(j) ensure that the use of new electricity technologies and renewables, and distributed generation, is facilitated and that generators using these approaches do not face barriers; and

(k) be consistent with government policies on climate change and energy efficiency.

Greenhouse gas emissions are to be minimised through these arrangements, in particular by minimising hydro spill, efficiently managing transmission losses and constraints, ensuring consistency with climate change and energy efficiency policies, promoting demand-side participation and facilitating new generation technologies and renewables.

The Electricity Governance Board should also ensure that:

(l) services that are most efficiently provided on a common basis are provided at a quality and quantity, set through a process of collective agreement with participants, which enables those participants to make trade-offs between alternative levels of service and price;

(m) the range of common services and mandatory rules is reduced over time where technological developments challenge the efficiency of ongoing compulsion;

(n) the provision of services is contestable wherever possible;

(o) rules and standards are robust and enforceable through a supervisory body that is neutral, separate from the body responsible for rule-making, and has sufficient power to monitor and enforce the rules (including fines for rule breaches);

(p) where appropriate, efficient and effective alternative dispute resolution processes are provided;