Protecting Consumer Rights in electricity market

Policy statements by the Major Electricity Users’ Group

“The need to achieve lowest possible delivered electricity prices for the required level of security demanded by consumers, both small and large, seems to have become a secondary issue in this years election” observed Ralph Matthes, Executive Director of the Major Electricity Users’ Group (MEUG) today. He believed that was a mistake.

“We’ve made good progress in the last 18 months in particular, but the policy makers and end consumers themselves cannot be complacent that the momentum for change will continue.

“MEUG has therefore today released three policies that we believe are necessary if consumers are to benefit from reforms of the power industry.
“The three policies are summarised as:

 Harmonising Competition Policy with Australia to promote effective and sustainable competition;

 Making light handed regulation of monopoly lines services work through industry self-regulating arrangements; and

 An efficient wholesale electricity market structure developed by stakeholder self-regulation and effective management of conflicts of interest.
“The common theme of these policies is the need to ensure consumer rights are maintained by closing the gaps on anti-competitive behaviour that restricts consumer choice and facilitating a framework that enables consumers to understand the methodology and agree charges for monopoly services.
“We believe that the direction of the policy changes over the last 18 months have made excellent progress towards reforming the industry and ensuring the benefits of the reforms flow to end consumers, eg:

 The Electricity Industry Reform Act 1998 facilitated the breakup of ECNZ and hence competition in the wholesale market – this has been a major reason why wholesale electricity prices this year were more than a third lower than any of the previous three years winter months.

 The Act also required ownership separation of line and energy businesses – this has removed some of the barriers to competition and cross-subsidies to retail and generation businesses that the vertically integrated companies previously practiced.

 The announcements last year of a 20% reduction in Transpower’s asset value, a lower target cost of capital and reduction in operating costs will lead to longer-term lower transmission costs – similar reductions in asset values and operating costs are inevitable for local distribution line companies.

 The adoption of the Multi-lateral Agreement on Common Quality Standards (MACQS) by most parties in the industry to consider what common quality standards should be. This is being achieved without the heavy hand or direct intervention of Government – instead Government through Transpower’s Statement of Corporate Intent has set the overall vision and left the details to all stakeholders, including end consumers, to agree. MACQS has been a significant milestone which will establish a powerful precedent for other industry self-regulating structures.”

“However those successes should not cloud the vision of policy makers – there is still work required to remove remaining barriers to competition, facilitating industry-self regulation of the natural monopolies, ensuring the benefits flow to all classes of consumer and cementing the gains to date into place.”

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