29 OCTOBER 2004 NEW ZEALAND GAZETTE, No. 139 3461

i power quality standards; reliability standards for the national grid; upgrades, expansions and
replacements of Transpower’s grid assets; terms and conditions for connection to the grid;
and pricing methodologies for the recovery of Transpower’s revenue requirements;

ii terms and conditions for the connection of generation to distribution lines;

iii pricing methodologies for the recovery of the revenue requirements of electricity distributors,
and

iv terms and conditions for the use of lines (and related services) by competing retailers.

105 It is evident that the exercise of the Electricity Commission’s functions, responsibilities and
powers affects the work of the Commerce Commission, and vice versa.

106 The Commerce Act 1986 and the Electricity Act 1992 have been amended to:

i require the Commerce Commission to take into account, when exercising its duties and
powers under Part 4A of the Commerce Act 1986, any regulations and rules made under
the Electricity Act 1992 (including any decisions made by the Electricity Commission under
those regulations and rules), and

ii require the Electricity Commission to advise the Commerce Commission of any regulation,
rule or decision made under the Electricity Act 1992 which is likely to affect the powers and
duties of the Commerce Commission under Part 4A of the Commerce Act 1986.

107 The Government requests the two Commissions to develop and publish a Memorandum of
Understanding on how they propose to operationalise the coordination of their respective roles.

108 The Commerce Act 1986 has been amended to allow responsibility for Part 4A to be transferred
from the Commerce Commission to the Electricity Commission by Order in Council should there
appear to be benefits in doing so. This transfer (after due process and consultation) may take
place at any time with regard to Transpower, but may not take place before 1 April 2009 for other
lines businesses.

Distributed generation

109 Distributed generation is generation which is connected to local distribution lines rather than the
transmission grid. It is expected to play an increasingly important role in meeting electricity
demand as the cost of smaller-scale and new renewable technologies continues to decline.
Distributed generation can improve security of supply by creating diversity of fuel types, locations
and technologies, and, where appropriately sited, helps reduce the need for transmission and
distribution upgrades. Accordingly, it is important that there are no unnecessary barriers to its
development.

Access to lines

110 The Government proposes to introduce regulations prescribing reasonable terms and conditions
on which line owners and electricity distributors must enable generators to be connected to
distribution lines. The objective is to facilitate the use of distributed generation by ensuring that it
does not face undue barriers in connecting to lines. The Electricity Commission will have
responsibility for administering the regulations and for proposing amendments as required.

Purchase of surplus generation by retailers

111 The Electricity Act 1992 provides powers to regulate terms and conditions for the purchase by
retailers of small surpluses of electricity from generating units owned or operated by consumers.

112 It can be difficult for owners of distributed generation units to negotiate terms and conditions with
local retailers to purchase small surpluses of electricity generation. High transaction costs are
involved. The Government would like to see this barrier to the development and uptake of
distributed generation reduced by setting appropriate terms and conditions for purchase of small
electricity surpluses by local retailers. The Government envisages that this policy should apply to
consumers with generation units capable of generating up to 40,000kWh over a year. A key
principle however is that retailers should not incur ongoing financial losses by the requirement to
purchase such electricity.