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Electricity review panel looks favourable to current market

Govt electricity review panel looks favourable to current market settings

By Pattrick Smellie

April 16 (BusinessDesk) - The government's electricity sector review appears firmly weighted against any major change to market settings, with six of its eight members identifiably supportive of the broad thrust of electricity market reforms over the last 30-plus years.

The review, which arose from a New Zealand First party demand during coalition negotiations to form a government last October, will be chaired Miriam Dean QC, a leading competition lawyer and director of several Crown and local government commercial entities, who also served on the review panel appointed by the previous government in 2009, which broadly affirmed pro-market arrangements.

The 2009 review's main actions were to require an "asset swap" between Genesis Energy and Meridian Energy to foster competition between electricity generators and a deepening of the wholesale electricity futures market to improve wholesale electricity price discovery.

The electricity sector has been keenly awaiting the appointment of the panel, whose membership was widely regarded as likely to signal the extent to which Labour is buying into NZ First's long-held scepticism about electricity market arrangements or whether it would prefer an inquiry that looks more to future developments, such as the growth of rooftop solar generation, the use of batteries at a household level, and the impact of the Internet of Things to allow consumers greater influence over their energy costs.

NZ First's hand was visible in the final terms of reference for the review, which contained new clauses not included in the original draft, requiring examination of whether power companies can make "excessive profits", "whether the costs of providing electricity services are or should be socialised or spread evenly across different classes of consumers", and whether all consumers have access to affordable electricity.

Also on the panel are three broadly pro-market consultants: John Hancock, an industry stalwart; John Small, a former academic economist and for 25 years a principal of the Covec consultancy, which has undertaken extensive work in the New Zealand electricity industry; and Lee Wilson, a founding director of Concept Consulting, a Wellington firm that includes former Contact Energy chief executive David Hunt and analyst Simon Coates, who has published frequently on the impact and economics of rooftop solar, batteries, and electricity network regulation.

They are accompanied on the panel by Anne Herrington, who was involved in the early development of the wholesale market with the Electricity Corporation of New Zealand and who served as a consumer representative on the Electricity Commission’s Retail Advisory Panel; and by Sue Roberts, whose 30 years of commercial experienced include 16 years in the energy sector in senior management and consultancy roles with Contact Energy, the Natural Gas Company, Genesis Energy and the Electricity Corporation of New Zealand. She is a current member of Electricity Rulings Panel.

The most obvious consumer voice on the panel is Sue Chetwin, chief executive of Consumer New Zealand, and a frequent critic of electricity pricing practices.

The panel is rounded out by former trade union economist Peter Harris, who worked as an adviser to former Labour finance minister Michael Cullen from 1999 to 2002, and was a member of the Electricity Commission and the establishment board for the Electricity Authority, which replaced the commission.

Energy Minister Megan Woods said the panel would "play a key role into assessing whether the electricity market is delivering power at the fair and equitable price".

“The panel’s primary task is to provide peer and technical advice for the review which will also look at whether the electricity market and its governance arrangements are appropriate for the rapid changes in technology and innovation taking place in the sector.”

The panel's first meeting is due later this month, with a final report expected early next year.


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