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Anderton on the Electricity Package

Hon Jim Anderton


The Alliance part of the Coalition government has worked long and hard with the Minister on this substantial package of reform for the electricity industry. In fact, it would be fair to say that there have been few issues which have occupied so much time in our ongoing negotiations in government.

We are grateful to the officials and to Pete Hodgson as Minister for (appropriately) their energy.

The previous National government took a world-class integrated power industry, ripped it to pieces, and sold off bits - all in the name of ideology. The result was a mess. The Auckland blackout in 1998 was a typical result. Extraordinarily valuable public assets were sold for a fraction of their true value. Others were broken into competing State Owned Enterprises, being readied for further sale. As regards the multi-billion public investment in Transpower, we were left with an electricity backbone with no clear mechanism for charging customers, and ensuring investment in new transmission.

We might lament National's legacy, but it is the current reality which marked the starting point for these reforms, and the limits of what could be achieved in the short term.

Both parties in the Coalition were concerned for the overall health of the industry, but the Alliance took particular interest in the following matters:
- protecting and enhancing the public sector assets (especially Transpower, but also local trusts, and the SOEs),
- consumer protection,
- security of supply;
- rebuilding the capacity for an integrated energy policy, and
- environmental protection.

We worked particularly closely on these proposals to ensure these results. These reforms should see better regulation, control of monopoly power, price control, consumer protection, careful monitoring of results, and, perhaps most importantly for the long term, the capacity of government to set environmental standards and incentives to deal with energy efficiency and sustainability.

As regards public sector assets, we believe that these proposals at least freeze the current situation, so that no further state electricity assets will be sold. Transpower is better protected, both in its pricing methodology and in securing some return for its investment.

The consumer should see more options, better choice, easier changing between suppliers, an effective complaints system, and an electricity industry that can be trusted to give fair value for money..

Supply should be more secure, mainly because the problems which provided major constraints on investments necessary to guarantee supply will now be addressed through the Electricity Governance Board mechanism.

The ability to set expectations via the Government Policy Statement will also enable the re-development of an integrated energy policy. This will obviously be important in the mid and long term, for economic development, and for environmental protection.

As regards economic development, there are constraints from inadequate capacity to East Coast forestry potential, for example, which we believe will now be able to be removed by new generation or extension of transmission capacity, depending on the exact circumstances.

Finally these reforms are critical to a coherent environmental policy. We need to send the right signals which will enable investment in renewable energy sources, and in Greenhouse-friendly technology. This framework should ensure we can either regulate, or use market incentives such as tradeable carbon emissions, in the course of time.

It will not surprise anyone to hear that the Alliance would have gone further than these proposals. But the outcome is an important correction to Max Bradford's messy legacy. Now the challenge is to make these new proposals work. All members of the public, the industry, and business will be monitoring these changes very closely indeed.


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