Broad bill closes net on energy sector

By CHRIS DANIELS, energy writer

Energy Minister Pete Hodgson has unveiled new legislation that will open a broad umbrella of regulation over the electricity and gas industries.

The complex and far-reaching bill is designed to bring together various streams of Government restructuring of the energy sector.

Amending four energy acts and the Commerce Act, the bill, introduced into Parliament yesterday, also covers the establishment of the Electricity Commission.

Speaking yesterday at an annual meeting of the Electricity Networks Association, Hodgson said a new regulatory regime needed to introduced urgently so much-needed improvements could be made in areas like security of supply and retail competition.

"We are faced with crucial challenges with the impending depletion of Maui, our on-going vulnerability to dry hydro years and the steady increase in demand for electricity."

Hodgson said he was interested in the issue of whether lines companies should be able to sell power from their own generators direct to consumers - making them retailers.

"I remain concerned that retail competition is not as vigorous in many regions as I would like to see."

Under the former government's energy policies, power companies were forced to choose between having a monopoly lines business or being generator/retailers.

Despite a surge of retail competition in 1999, since full retail contestability was allowed, there are now no power retailers that are not part of one of the big generators.

The incumbent retail brands in each particular area rarely compete for new residential customers in each other's territories.

Hodgson said that the new law included changes that would actually constrain some of his powers as Energy Minister.

A 2001 energy law was criticised for allowing the minister to impose rules and regulations on a whim, with little if any oversight.

Under the new law, the minister can no longer recommend a regulation or make a rule without first receiving a recommendation from the Electricity Commission.

The bill is likely to be referred to Parliament's commerce select committee, which will hear submissions. It is not likely to become law until next year.

The bill

Updates the Electricity Act to reflect the establishment of the Electricity Commission.

Gives the commission powers to ensure security of electricity supply, including contracting for reserve supply.

Gives the commission more power to regulate for consumer protection.

Clarifies the roles of the Electricity Commission and the Commerce Commission in the energy sector.

Allows the Electricity Commission to take over regulation of the gas industry, should that sector fail to agree on a self-governance structure.

Allows lines companies to own power generation up to 25MW or 10 per cent of their maximum demand, or for any reserve energy contracted to the Electricity Commission.