Caution on energy regulation

By Richard Braddell

WELLINGTON - Maintaining security of electricity supply and the management of price regulation for power firms are concerns central to the energy policy unveiled by Labour yesterday.

The policy, which also holds dear a shift in focus from supply to energy efficiency, details a number of options, including the possible reintegration of ECNZ.

But it is short on concrete proposals which would only be determined after a detailed inquiry due next autumn.

On the security side, Labour's inquiry would weigh the merits of reintegrating ECNZ with a view to better management of hydro-lake levels.

Energy spokesman Pete Hodgson said there was no immediate danger of hydro lakes running low because of a warm and wet winter which had begun with an oversupply of electricity.

But Labour would examine the longer-term risk and decide if it was appropriate to put ECNZ back together at corporate level, or to maintain the baby ECNZs and impose some kind of responsibility on generators to manage hydro levels as was done by ECNZ before the split.

The most difficult problem was the regulation of lines companies.

Labour, in concert with other political parties, scuppered the price regulation bill put up by Commerce and Enterprise Minister Max Bradford.

Mr Hodgson said that although it was Labour's expectation that there would be price regulation of lines firms, it would not be implemented while there was a dearth of information about company cost structures To go ahead without appropriate understanding was to risk further network failures such as Mercury's in Auckland last year. Lines companies' chief executives might work the system to boost returns to shareholders, and their own performance bonuses, while skimping on capital spending.

Mr Hodgson said more work needed to be done on the CPI-X formulation in the Government's rejected reform.

X, or the factor by which lines companies would be constrained from mirroring the Consumers Price Index in raising charges, should vary between firms depending on items such as topography, the amount of underground cable and customer dispersion.

But Mr Hodgson said there was virtually no New Zealand data on these matters, and only two people at the Commerce Commission were working on it.

"The possibility is that we are going to find this all very hard. Price-capping regulation is not straightforward, but we have access to a great deal of overseas experience that has not been used in New Zealand."