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A bad game blame: the rules, the referee

Friday, 15 September 2006,

Canterbury Manufacturers’ Association

15 September 2006

A bad game blame: the rules, the referee, the players or the crowd?

The Canterbury Manufacturers’ Association says that sacked Electricity Commissioner Roy Hemmingway is not solely responsible for the state of the electricity system in New Zealand. The Association was concerned that he characterised a reserve margin of 9% as ‘pretty good’ but says that the rules also make the game and the Government is responsible for the rules.

“It is hard to say if Mr Hemmingway has achieved a lot during his tenure at the Commission”, says Association CEO John Walley. “Unfortunately for Mr. Hemmingway and the New Zealand consumer, the Electricity Commission operates within the framework of the Government Policy Statement. Bad rules can make for a poor game, not the referee or the players”.

Mr. Walley says that the Government Policy Statement does not provide for other than last minute investment in transmission and high cost generation. The requirement that the consumers determine the level and quality of service of transmission, rather than Transpower, was flawed from its inception. As the CMA has shown, the consumer has no influence in this process at all. The system is not consumer-centric says Mr. Walley, and therefore the Commissioners task of reaching an agreement between all parties in this environment was almost impossible.

Mr. Walley says that the Government has a difficult task to convince New Zealand that Mr. Hemmingway’s dismissal was only due to shortcomings on issues he could have influenced. You cannot blame the referee for following the rules, any more than you can blame the players.

“The rules of the game are to blame. New Zealand’s electricity system operates in individual silos or links in a chain; however no matter how efficient each link, the chain is only as good as the weakest link. A system wide view is necessary if the outcomes are to be improved with low cost base load generation and improvement in the reserve capacity and nationwide transmission taking the power to where it is used. This week’s power outage further illustrates we are close to the edge”.

“It is time to admit that there are serious flaws in the system and that mistakes have been made. However, the Government is blaming the referee or the player, and maybe the crowd and not seeking to fix the problem”, says Mr. Walley. “If this continues they will not come out unscathed, electricity is politicised and like it or not, few governments will stand if the lights go out”.

Bold decisive action can re-establish public confidence that the New Zealand electricity system runs for them, not the Government or the electricity industry.

Mr. Walley asked whether the upcoming National Energy Policy will deliver this. “Time will tell, but under the current climate, there is a fear that it will talk a good game but not deliver one. Already wind farms are being cancelled due to cost so there are doubts about effectiveness. You cannot please everyone on this issue and that is why there are so many competing agendas, a complicated and top heavy regulatory scheme and little or no progress”.

“This situation benefits a small handful of people but not the majority of New Zealand electricity consumers. Like Mr. Hemmingway, sooner or later everyone will pay the price”.


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