Electricity blackouts of 2003 prominent in Survey

22 June 2004

Electricity blackouts of 2003 reverberate in
Capgemini Global Utility Survey

New Zealand’s electricity supply worries are being echoed around the world, according to the latest Capgemini Global Utilities Survey, released this week.

The survey is based on interviews with senior utilities executives worldwide, including representatives of all of New Zealand’s major gas and electricity companies.

John Hancock, Associate Director of Energy and Utilities at CGNZ, Capgemini’s New Zealand affiliate, said the survey showed that New Zealand was not alone in its supply security problems.

“The electricity blackouts experienced in London, Italy and New York in the last northern summer were reflected in the survey respondents’ uncertainty, particularly in terms of how electricity markets will work to ensure sufficient supply and reliable delivery of electricity,” Mr Hancock said.

He said the survey highlighted a lack of clarity internationally on who is responsible for securing electricity supply.

“The events of 2003 reawakened concerns about deregulation and its challenges and benefits. This year’s survey shows that there are some important questions to consider around regulatory uncertainty, political intervention and a lack of long term price signals to support investment,” he said.

“It’s interesting to note that these concerns, which are only just beginning to emerge internationally, are the same points that have been raised in New Zealand over the past two years.”
Mr Hancock said that despite the concerns about deregulation, there was no suggestion that it should be reversed.

“Without exception, every respondent to this survey accepted that deregulation is here to stay. But it is clear that there are still a number of concerns about how deregulation is working and whether, in its current form, it will deliver the kind of security required to support economic and social growth in the nations surveyed.”

Mr Hancock said the survey pointed to the need to continually review and renew electricity market design, to ensure markets continue to deliver reliable electricity at appropriate prices over the long term.

“In New Zealand our market design has essentially been static for five years now. The international lessons lead us to believe that this may present a major risk for our own sector and for security of supply.”

In previous years the Survey has highlighted New Zealand respondents’ concerns over complicated regulatory structures, regulatory uncertainty, political intervention and transmission investment.

Mr Hancock said despite the establishment of the Electricity Commission in early 2004 and a major programme of work covering wholesale and retail electricity market design, transmission investment and pricing, common quality and security of supply, there is still major concern amongst New Zealand respondents about the impact of regulation on the investment environment.

“This survey confirms that deregulation is not by itself a comprehensive energy policy, and that current trading arrangements provide only short-term price signals and are too illiquid to provide either firm prices or firm markets to underpin large-scale investments.

“Moreover, the climate for investing in much-needed new generation plants remains complex and difficult, with a great deal of uncertainty over market rules and environmental legislation,” he said.

Globally, two thirds of those surveyed indicated that retail competition had a major impact on prices and almost half saw an important impact on customer services levels. However, there were still some concerns about customer churn rates, the level of transaction costs, and the absence of clear responsibility or incentives to fix problems.

See http://www.cgnz.com/industries_energy/energy_utilities_news.asp?copy_id=93
Global Utilities Survey: New Zealand respondents
The following organisations were interviewed for the Capgemini Global Utilities Survey: Contact Energy, Genesis, Meridian Energy, Mighty River Power, NGC Holdings Ltd, the Electricity Commission, Powerco, Transpower, Trustpower, Unison, Vector Networks.

About CGNZ
CGNZ Limited is the exclusive New Zealand licensed affiliate of Capgemini, with over 140 staff in our Auckland and Wellington offices. The affiliate status provides CGNZ with all the benefits of a global group, complemented by local ownership and an entrepreneurial approach to the market.

More information about CGNZ’s services, offices and research is available at www.cgnz.com

About the Capgemini Group

Capgemini, one of the world's foremost providers of Consulting, Technology and Outsourcing services, has a unique way of working with its clients, which it calls the Collaborative Business Experience. Through commitment to mutual success and the achievement of tangible value, the company helps businesses implement growth strategies, leverage technology, and thrive through the power of collaboration. Capgemini employs approximately 48,000 people worldwide (55,000 including Transiciel) and reported 2003 global revenues of 5.754 billion euros.

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