538 NEW ZEALAND GAZETTE No. 18

Constitution of the Governance Board

11. The Government expects the industry to establish a constitution for the Governance Board reflecting the following principles:

Key Design Principles for the Governance Board’s Constitution:

• The Governance Board should comprise between 5 and 9 members (including the chair).
• There must be an independent chairperson.
• The prime obligation of Governance Board members should be to develop and enforce rules consistent with the Guiding Principles; they must not act in the interests of individual participants.
• Governance Board members should demonstrate background and expertise to enable them as a group to give effect to the Guiding Principles. In particular, at least some members should be able to contribute expertise and experience in the following areas: consumer interests, distributed generation/renewables, energy efficiency/demand side management, generation, network management and transmission. All members should be aware of the interests of consumers.
• A majority of the Governance Board should be independent persons. (Any director, employee or significant shareholder of the supply side of the industry does not meet the test of independence.)
• The independent members of the Governance Board should be appointed after consultation with the Minister of Energy.

Wholesale Market

Contestable service provision

12. The Governance Board should be responsible for determining the services to be provided to the market, which should be contestable wherever possible.

Competing market arrangements

13. The new governance framework should not preclude the establishment of any competing arrangements consistent with unified security constrained dispatch and consistent with this Government Policy Statement and the Guiding Principles.

Market surveillance arrangements

14. The new governance framework should provide for an effective and independent market surveillance body to monitor compliance with and enforce rules. The body should be able to obtain all the information it requires, recommend changes to the rules to the Governance Board and have access to dedicated resources. It should proactively investigate potential breaches of market rules.

Release of wholesale market information

15. The Governance Board should ensure that information on offers by generators for dispatch (including ancillary services) is released publicly after 2 weeks.

Spill from hydro dams

16. The Governance Board should ensure that quarterly information is made available on the amount, timing, location, and reasons for, spill within 4 weeks of the end of each quarter.

Forward electricity price curve

17. The Governance Board should ensure that aggregate information on hedge prices is made available, and should take steps to promote the development of trading markets that discover forward prices for electricity.

Real time market

18. As a first step toward promoting active demand-side participation, the Governance Board should move urgently to implement real time dispatch prices so that the demand side can see and respond to real time market prices. The Board should also explore and consider any other opportunities for stronger demand-side participation in support of the Government’s overall objectives.

Projections of system adequacy

19. The Governance Board should facilitate arrangements for the preparation and release of short and medium term projections of system adequacy, covering issues such as forecasts of energy and reserve availability and transmission outages, to ensure that industry participants are fully informed on factors likely to affect prices.

Financial instruments to manage transmission risk

20. The Government supports the development of innovative financial instruments, such as financial transmission rights, so that market participants can better manage risk in respect of transmission losses and constraints.

Transmission Issues

21. Transmission has strong natural monopoly characteristics. This 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.

22. The Government’s expectations in this regard are specified in the objectives and principles for the provision of transmission services set out in Attachment 1 to this Policy Statement. Transpower’s statement of corporate intent will be modified in due course to reflect the new objectives and pricing principles.

23. Transpower will be responsible for developing the transmission pricing methodology consistent with the objectives and principles for the provision of transmission services outlined in Attachment 1. The Governance Board should ensure that consistency with the objectives and principles has been achieved. The Governance Board is also to ensure that transmission charges established consistent with the transmission pricing methodology are enforceable on the same basis as other rules set by the Governance Board.

24. As a safeguard in case the Governance Board and Transpower are unable to agree on a satisfactory transmission pricing methodology, the Government proposes that a provision be included in legislation to ensure that the Government can empower the Commerce Commission to determine the transmission pricing methodology. If the transmission methodology is established by the Commission, Transpower’s charges would be recoverable as a debt.