New regulations gazetted

24 March 2005

New regulations gazetted

Energy Minister Trevor Mallard today announced new regulations providing for electricity suppliers to pay for additional work by the Electricity Commission in overseeing security of supply and electricity efficiency in New Zealand's electricity market.

"The commission's objective is to ensure that electricity is produced and delivered to all classes of consumers in an efficient, fair, reliable and environmentally sustainable manner," Trevor Mallard said.

The new regulations, which will come into effect on 21 April 2005, were gazetted today. They provide for suppliers to pay for the commission's procurement of reserve energy and its facilitation and promotion of electricity efficiency. They also provide for the recovery of costs previously incurred by Transpower in developing technical codes and rules for the operation of the power system.

If electricity suppliers choose to pass on the cost of the new levies to consumers, it is expected to add approximately $8 to a typical household annual power bill in the 2005/06 financial year.

Among its new duties, the commission is responsible for procuring reserve energy to ensure adequate security of electricity supply during dry periods.

The new security levy on electricity suppliers includes the costs of Whirinaki, the new government power station that provides 150MW of reserve energy capacity. The cost of the reserve energy plant at Whirinaki for the 2005/06 financial year is expected to be around $26 million (including GST). The actual cost recovered through levies in any year will vary according to the station’s net operating surplus.

“The levy will also cover the cost of electricity efficiency work. The commission is looking at a mix of pilot electricity efficiency programmes and research and investigation, to determine the level of investment that will most benefit consumers. Power savings through electricity efficiency improvements can be made for around half the cost of generation from a new power station,” Trevor Mallard said.

Prior to the commission being established in late 2003, the costs for running the electricity markets were incurred by the industry under self-regulation. Now that these costs are paid for through a levy, they are more easily identifiable and transparent.

In addition to its new work, the Electricity Commission is responsible for many issues not previously handled under industry self governance. Its scope now includes:

Consumer protection and enhanced retail competition Managing security of supply – minimising and managing risk of power shortages through the provision of reserve capacity and short term demand management to overcome capacity constraints Transmission governance – developing a framework for Transpower's planned $1.5 billion upgrade to ensure that it is appropriate, robust and timely Demand and supply modelling – to support better market operation and capacity planning functions Hedge market development - promoting transparent and liquid hedge markets, particularly for those with limited physical cover

ENDS