Electricity regulation plan rejected by industry

By BRIAN FALLOW

The electricity sector has decisively voted against industry self-regulation.

Industry players had to vote on whether to accept a set of self-regulatory arrangements including a rulebook running to hundreds of pages and an Electricity Governance Board elected by industry participants.

The rules, drawn up by a committee headed by David Caygill in an arduous negotiating process over the past three years, received the blessing of the Commerce Commission last September.

But they were rejected by a margin of 41 to 59 per cent.

On the consumer side of the industry, which regarded the arrangements as entrenching the dominance of the generators, the "no" vote was 95 per cent.

All generators except Meridian Energy voted for the arrangements.

Its chief executive, Dr Keith Turner, said Meridian could not support the arrangement because it was unable to secure separate treatment for its contract with its major customer, Comalco.

"We can't have a situation when other parties in the industry can over-ride the obligations we have, or Transpower has, under our contracts with Comalco, for example, over quality standards."

Comalco had made it clear it could at any time consider adherence to the rulebook a wilful breach of contract.

Most of the local lines companies supported the arrangement, but Transpower, which operates the national grid, did not.

Caygill said the Government had indicated that, should there be insufficient support for the industry proposals, it would proceed to implement its own governance arrangements for the sector.

Further announcements are expected next week.

It will now appoint a Crown electricity governance board and have powers of direction like a regulator.

The question now is what parts of the rulebook a Crown-appointed board would pick up and where it would start afresh.

Turner is especially concerned about Part F of the rulebook which covers transmission investment and pricing.

"It could take five years to tell whether those arrangements would work and I don't think the country can wait that long," he said. "Transpower needs the capacity to make investments in the interests of the country and of energy efficiency as distinct from transmission security, and to recover the cost of those investments."