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NEW ZEALAND GAZETTE

No. 18

◊ effectiveness: the scheme is effective by having appropriate and comprehensive terms of reference and periodic independent reviews of its performance;

● self-funding by the industry;

● compensation where appropriate; and

● a fines process through the independent surveillance body set up by the Governance Board in accordance with point (o) of the Guiding Principles. Key features of the fines process should include:

◊ consultation with the Ministry of Consumer Affairs on issues that should be subject to fines;

◊ ability to receive complaints direct from consumers as well as referrals from the external, consumer complaints resolution scheme; and

◊ fines imposed to take account of any awards or compensation made by the consumer complaints resolution scheme.

Government Oversight of Progress

31. The Government favours industry solutions ahead of regulation. However, implementation of these changes must be timely and effective. The electricity industry is invited to move quickly to put in place the new governance structure.

32. The Chair of the Governance Board (or the Chair of any establishment committee of the Governance Board) should report to the Minister of Energy every two months on progress in implementing the Government Policy Statement. Until such time as the Governance Board or an establishment committee is established, these reports should be submitted by the chairs of NZEM, MARIA and MACQS.

33. If there has been insufficient progress in establishing the Governance Board that meets the Government’s design principles, the Government will regulate to establish the Governance Board.

34. The Government advises that, working with the Ministry of Consumer Affairs, the industry should agree on the overall features and design of a consumer complaints resolution system, including the rules and terms of reference. If there has been insufficient progress, the Government will consider other options, including regulation, to establish the system.

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.

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 Government Policy Statement “Management of Dry-Year Risk”, 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. The existing statement to the Commerce Commission under section 26 of the Commerce Act 1986 “Further Development of New Zealand’s Electricity Industry” of 8 December 2000 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 February 2002.

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.