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Law change could spur $1Billion spend

Law change could spur $1Billion spend on new power generation

But Government Plucking Consumers to Feather Its Own Nest

Wellington (Oct. 20, 2003) - The Energy Trusts of New Zealand is urging the government to change the law to allow consumer trusts to invest in much-needed generation facilities and sell that power directly to consumers.

The ETNZ says consumer trusts that own power transmission networks need to be allowed to sell electricity they produce directly to retail customers, so they can build a business case for generation investment based on guaranteed long-term revenue.

ETNZ members could provide $1-2billion of new investment in New Zealand's troubled generation industry, according to ETNZ chair Ken Gilligan.

"There are 25 members of the ETNZ who could help solve New Zealand's electricity generation problem almost overnight, if the government would make this simple change to electricity regulation," Mr Gilligan said.

"Instead, we are seeing yet another brutal and inconsiderate Government approach to the electricity industry whereby consumers are being asked to pay for an over-complicated, over-regulated and overtly unfair system."

Mr Gilligan was responding to a discussion paper by the Ministry of Economic Development, which proposes that community-owned electricity trusts pay for the connection of small-scale electricity generation plants to their power line networks

"While we support the development of such small-scale generation, we expect connection, particularly with state-owned enterprises, to occur on commercially sensible terms. It is very generous of Mr Hodgson to offer the assets of the ETNZ members for nothing, but it discourages efficient investment in the industry," he said.

"Two-thirds of the electricity generation companies in New Zealand are owned by the government, so perhaps we can understand Mr Hodgson's generosity with our assets.

"If this goes ahead then the costs of connecting these plants will have to be passed on to our consumers. So quite frankly, the government is plucking consumers to feather its own nest."

Mr Gilligan said the government should be promoting competition in the generation and supply of electricity. Allowing ETNZ members to build generation plants to compete with the giant SOE producers and sell power directly to customers will do that.

"Trusts are willing to assist the industry by investing in it, but until there is a clear and cohesive approach to regulation of the industry, this will not happen," Mr Gilligan said.

The government appears to be concerned that because lines companies own monopoly assets they might cross subsidise their retail electricity sales. But Mr Gilligan pointed out that ETNZ members can transparently separate their monopoly business from contestable operations to eliminate any fear of cross subsidisation.

"The bottom-line is that if lines companies are allowed to compete in both the retail and generation markets, we can create some real and much needed price pressure in the market. That means a drop in household power bills, and an improved assurance that there will always be enough power to go round."

Mr Gilligan said the evolving policy framework is great for the state-owned enterprises, but it lacks the support of industry participants like the ETNZ.

"The government needs to take these issues seriously to keep the lights on.

"Member trusts have investments of more than $5 billion in lines companies and we are prepared to invest in the industry if we are given the chance," he said.

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