MEUG: Are consumers going to be betrayed?
MAJOR ELECTRICITY USERS' GROUP
Tuesday, 13 June
2000
For immediate release
Media release by the Major Electricity Users’ Group (MEUG)
Contact: Terrence Currie, MEUG, phone Wellington (04) 385 2945 or 021 348 595
Are consumers going to be betrayed?
The Report of
the Inquiry into the Electricity Industry represents one
step forward and ten steps backward for consumers according
to the Chairman of the Major Electricity Users Group
Terrence Currie. He said, “the monopolies within the
industry have been let off scot free with price control
still just a threat.” “Consumers wanted price control to be
imposed immediately”. ”Instead they have a recommendation
that an ombudsman scheme be introduced along with support
for the inclusion of electricity into the Consumers
Guarantee Act and a recalibration of lines companies assets.
“Consumers will feel betrayed as this Inquiry was set up by
a Government which while in opposition campaigned vigorously
to have a CPI-X regime introduced. Draft legislation to
impose price controls was opposed on the grounds that it did
not go far enough. The Minister of Energy must be
disappointed that the Inquiry Panel did not recommend that
the monopolies be subject to price control, or that price
reductions be mandated now.
Many consumers feel that
since corporatisation in 1992/93 they have been exploited by
their line companies. Last year they thought those
companies were going to be placed under price control. Now
they may wait forever. It will be the Commerce Commission
that decides whether any line company will have price
controls imposed. Given the appeal procedures available
against Commerce Commission decisions the likely outcome is
that even if a lines company blatantly increases its prices
it is unlikely to be penalised.
The Commerce Commission
will be required to undertake a recalibration of lines
company asset values. MEUG has been particularly critical
of the application by lines companies of the Optimised
Deprival Valuation (ODV) methodology so an independent one
off recalibration of monopoly line asset values is welcomed.
No timing for this recommendation has been included but
consumers would expect this exercise to be undertaken
immediately. What will be essential in this process is for
some stakeholder or consumer participation in this
recalibration process rather than allowing all calculations
to be black-boxed.
Most consumers will find the Inquiry’s
Report bizarre in that the competitive activities within the
industry, namely the generators and retailers, will be
compelled to join a new wholesale market structure thereby
eliminating the opportunities to bypass the market. The
costs of participating in that market will prevent super
competitive bilateral contracts that are the hallmark of
non-NZEM trading.
The Inquiry has recommended the
establishment of a new industry governance structure to
oversee many critical activities within the electricity
sector. This industry board is to comprise a majority of
independent representatives but will simply end up being
elected by the industry for the industry. The only industry
structure that has end user consumers on its governance
structure as of right is the Grid Security Committee (to
manage MACQS) which has three consumer representatives.
That Committee has now been folded into this new Industry
Board with the report mentioning independents not
commercial, domestic or industrial consumers. Consumer
interests according to the panel can be addressed through
the overall guiding principles. It again seems strange that
direct representation of consumers has been relegated to
participation on industry working groups.
The Inquiry
Report does support the establishment of an energy sector
ombudsman, which could handle consumer complaints over
electricity and gas issues. Consumers have been pushing for
an electricity ombudsman for some time so the Inquiry’s
endorsement of this scheme may create the necessary momentum
to make some rapid progress.
Consumers have also been
pushing to have electricity included in the Consumer
Guarantee Act so the support of the Panel is also
welcome.
MEUG believes that instead of CPI-X being
immediately imposed consumers have ended up with a new
Industry Governance structure with no guaranteed
representation. Therefore the Report will be viewed with
deep disappointment and an acute sense of betrayal.