Energy Minister Pete Hodgson today announced a review of the way New Zealand's electricity system functioned over the winter.

Cabinet today approved terms of reference for the review. It will be an open process of calling for submissions, posting them on a public website and inviting cross-submissions. A official summary of submissions will be prepared for Cabinet and posted on the website.

"Following the submission process I will invite Cabinet to make decisions on whether further changes are required to our electricity arrangements," Mr Hodgson said. "If there are changes to be made I intend to announce them before the end of the year."

Mr Hodgson said the response from New Zealanders to the Government’s energy efficiency and conservation campaign over the past six weeks had been very encouraging.

“Voluntary power savings, temporary relaxation of transmission security and greater use of thermal generation have got us through a difficult period without supply interruptions. Despite record low inflows to the hydro lakes we can now be confident that the risk of a supply crisis has eased very significantly for this year.

"This winter’s experience has been a potent reminder of New Zealand’s heavy reliance on hydroelectricity and consequent vulnerability to dry years. It has been a punishing experience for some electricity retailers and large industrial consumers who were insufficiently hedged against the high wholesale market prices a dry year produces.

"A number of electricity consumers and industry participants are now asking whether the market works properly under dry-year supply pressure. I think it is timely and healthy for these questions to be asked, which is why I have arranged for this review."

Submissions and a brief background paper will be posted on www.winterreview,govt,nz (accessible from 13 September). Submissions are due by 5 October and further comments by 19 October. Terms of reference and arrangements for submissions are attached. The Government Policy Statement on electricity is available at www.med.govt.nz/ers/electric/package2000

Post Winter Electricity Review: Submission Process

Submissions should be addressed to Hon Pete Hodgson, Minister of Energy, and:

- e-mailed to the Minister’s private secretary, warren.player@parliament.govt.nz; or

- mailed to the Minister at Parliament Buildings, Wellington; or

- faxed to the Minister at (04) 495 8449;

and be received by 5 October 2001. Please note that submissions by e-mail are strongly preferred.

It is intended that submissions will be posted on www.winterreview.govt.nz as soon as possible after they are received. It would therefore be helpful if submissions were e-mailed, or provided on a floppy disk or CD-ROM (PDF or Word format). Scanned copies of submissions received by non-electronic means will be posted.

There will be an opportunity for parties to comment on the submissions of others following 5 October. Cross-submissions, which will also be posted on the web-site, will be due by 19 October.

A summary of submissions will be provided to Cabinet and posted on the web-site.

Terms of reference attached. The December 2000 Government Policy Statement is available at www.med.govt.nz/ers/electric/package2000.

Any commercial or other confidential material in submissions will be protected. Please specifically draw attention to any such material in your submission.

A full statement of the policy for handling commercial and confidential material follows.

Submissions will be posted on www.winterreview.govt.nz unless:

- there is good reason, pursuant to the Official Information Act, to withhold the information; and

- that good reason outweighs the desirability, in the public interest, of making the information available.

The grounds for withholding information are set out in the Act. The grounds include that information may be protected:

- where the making available of the information would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information; or

- where the information is subject to an obligation of confidence, and where the making available of the information would be likely to prejudice the supply of similar information, or information from the same source, and it is in the public interest that such information should continue to be supplied.

Should you wish any material to be withheld, please indicate the grounds for withholding. Please note that the decision on whether to release material rests with the Minister or Ministry, and that any decision to withhold information is subject to appeal to the Ombudsman.

Terms of Reference: Electricity: Post Winter Review

1 What factors contributed to wholesale electricity market developments in the 2001 winter?

2 How effective were existing market arrangements in responding to these developments?

3 What changes should be made to market arrangements, why are these changes recommended and what are the costs and benefits?

In responding to this question, please take into account the improvements to market arrangements required by the Government as set out in the December 2000 Government Policy Statement on Electricity.

4 What changes to the energy efficiency and conservation campaign should be considered in case the need arises in future for a similar campaign?

Timeline

Review Terms of Reference announced

10 September

Submissions close

5 October

Cross-submissions close

19 October

Summary of submissions 9 November

Cabinet decisions

December

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