Hon David Caygill
Chair
Electricity Governance Establishment Committee
C/- Buddle Findlay
PO Box 2694
WELLINGTON

Dear David

Thank you for your letter of 28 February on progress in meeting the Government’s expectations for the electricity industry as set out in the recent Government Policy Statement.

I am pleased with overall progress across the broad range of priority issues on which the Establishment Committee is focussed. Good progress is clearly being made on putting in place arrangements that meet many of the Government’s key expectations. Other matters that the Government wishes to see progressed are on a work programme to be addressed after the immediate phase of intensive work to set up the new Board is further advanced. This is encouraging, and I am grateful to you and your team for the very significant effort involved.

I appreciate that the report you have provided is in the nature of “work in progress” and that the full arrangements are still evolving. I have listed below some areas I will be particularly interested in as the next stage proceeds.

Guiding Principles
As you know, the guiding principles in the Government Policy Statement will form the basis of Government evaluation of the success of self-governance. fferent from the Government’s.

As work on developing the self-governance arrangements proceeds, I will wish to ensure that the key outcomes that the Government wishes to be put in place are appropriately reflected in the new arrangements. In particular, I would like to see a clear acknowledgement in the new arrangements that the Government will hold the industry board accountable for delivery of the key outcomes in the Government Policy Statement.

Mandatory Rules
I understand and agree that mandatory rules in relation to common quality, real-time co-ordination, efficient dispatch, and common reconciliation are required. Participation in the new arrangements should not be open to parties that do not agree to be bound by these rules.

The Government indicated in the Government Policy Statement a number of other areas where rules should be developed that should be mandatory in the same way as the rules listed in the preceding paragraph. I look forward to advice in due course as to how this expectation can be achieved.

Involvement of Consumers
I understand that arrangements for voting members onto the Board and for voting on rules have yet to be finalised.

I will wish to ensure that arrangements in each of these areas allow for an appropriate level of participation by consumers, including bodies able to represent the interests of domestic and small business consumers.

Rule-Making
Arrangements for rule-making appear to be quite well developed.

I note your comment that the Board should act as the primary governing body of the new arrangements. While it is understood that rules are to form the substance of the proposed mutli-lateral contract, I will wish to confirm that the Board will be able to control the rule-making process to meet the key outcomes in the guiding principles, and that consumers will have an appropriate opportunity for involvement in rule-making.

Particular areas of focus in development of the rule-making process are likely to include:
 representation on and funding of the working groups;
 control by the Board of the agendas of the groups (including an ability to establish report deadlines);
 whether there is a risk that matters which the Board may wish to see progressed might be held up by members (eg how will the risk that the Board may disagree with a recommendation of a working group that no change to the rules is needed be handled?); and
 the process for strike-down of rules in any cases of inconsistency with the guiding principles (eg members’ rights vis-à-vis rights of the general public to challenge rules to the judicial body).

I look forward to reviewing progress on these and other matters when I receive your April report on implementing the Government Policy Statement, and would be happy to discuss any of the issues with you in advance if you would find that helpful.

Yours sincerely

Hon Pete Hodgson
Minister of Energy

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