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Powerco Welcomes Greenlight For Generation

Powerco Welcomes Greenlight For Generation

New Zealand’s second largest electricity lines company and largest gas pipes company, Powerco, welcomed today’s Government announcement which will allow the lines sector to invest in generation.

The Government’s proposal will permit lines companies to invest in and own standby generation and standard day-to-day generation of up to 25 megawatts, or 10 per cent of their load.

Powerco Chief Executive, Steven Boulton, said allowing the lines sector to expand into generation would help provide the electricity industry with much needed flexibility, and would increase competition and efficiency in the sector.

“Providing the lines sector with an opportunity to play a role in developing new generation could result in lines businesses building small, efficient, regional generation plants connected straight into local networks, as well as larger standby stations,” he said.

“This proposal could also help reduce overall transmission loads on the national grid and provide communities with small localised sources of electricity.

“The benefits to consumers are evident.”

Mr Boulton said allowing lines companies to play a role in generation posed an interesting next question as to whether the door to retailing should also be opened to lines companies. “With today’s announcement providing some capacity for industry reintegration, the discussion about the role of lines companies in selling their own electricity to consumers is one we are looking forward to having with Government,” he said.

However Mr Boulton said he was concerned at a suggestion that lines charges would be regulated so that generators were charged ‘no more than was reasonable’ for connecting to local lines.

“With the desire for quick new generation, the lines sector will be nervous that any embedded generation projects will be connected to local lines at unrealistic or opportunistic regulated prices.

“If we are to encourage additional investment in our national infrastructure, and a stronger, more competitive electricity market, then the costs of connecting new generation must not be artificially imposed through regulation,” he said. Regulating these connections could simply mean that consumers would be required to subsidise this investment as well.

Mr Boulton said the agreement between Powerco and TrustPower in which Powerco will connect Trustpower’s Taraurua windfarm directly into its lines was an example of two publicly listed companies coming to an appropriate and fair commercial arrangement. We also have a number of other generation investors who have engaged with Powerco to achieve commercial outcomes to connect distributed generation said Mr Boulton.

“There is plenty of evidence that the market is working effectively in this area and, on the other hand, evidence that regulation, or fear of regulation, is stymieing the investment needed for sustainable national economic growth. The fundamental economic issue remains focused on developing a business environment for the whole electricity sector – where ongoing investment is incentivised. The sector will, I am sure, be openly talking with Government on this point.”

Powerco is New Zealand’s largest gas and electricity distributor in terms of network length, the largest gas distributor and second largest electricity distributor in terms of total consumer connections. Powerco has approximately 295,000 electricity consumer connections and 106,000 gas consumer connections in the North Island. Powerco is a publicly listed company, listing on the NZSE in December 2000 and was included in the NZSE40 index on December 2, 2002.

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