Hodgson unwraps electricity package

By RICHARD BRADDELL

The Government has followed the key recommendations of the Caygill inquiry into the electricity industry in a detailed package of reforms unveiled yesterday by Energy Minister Pete Hodgson.

A super board will replace three existing industry governance structures. It will be set up by the industry but with a majority of independent members, including the chairman.

Its rules will be binding on generators, Transpower, distributors and retailers.

To ensure it meets the Government's requirement for rapid implementation, it will report two-monthly on progress during its establishment phase.

Mr Hodgson said that the Government aimed to ensure fairness and transparency for electricity consumers and environmental susceptibility.

While its thrust was for industry solutions, regulation would be introduced where necessary.

This included the monopoly lines businesses, which will be forced to foot the bill of more than $2.2 million for a Commerce Commission recalibration of their valuations.

The Commerce Commission would then identify inefficient lines companies and cap their prices according to a consumers price index minus X formula. Where X equalled the rate of inflation, the effect would be a price freeze.

But Mr Hodgson said he had been told by the lines companies that 96 per cent of customers would not have a price rise in the coming year, which would make it the second in a row with few or no rises.

While many of the recommendations are focused on a better deal for consumers, they also drive deep into the industry and the structure of its markets.

Restrictions on the ability of lines companies to operate local generation facilities will be eased through the option of mirror trusts.

The intention is that lines companies and small local generators can take advantage of technologies such as cogeneration and fuel cells to supplement local supply at peak times.

In addition to lower prices, it is hoped that the so-called distributed generation will enable lines companies to avoid the cost of investment in additional distribution facilities which would be required only to meet peak demand.

In the case of renewable energy sources, such as wind farms, no restriction will be put on new generation by lines companies.

The Government is also planning the introduction of a real-time wholesale market so that power users will be better able to adjust their use according to prices, thereby reducing peak demand.

All hydro spills will have to be reported at three-monthly intervals.

Joining Mr Hodgson at yesterday's announcement, Deputy Prime Minister Jim Anderton said the Alliance must take some of the blame for the delay in releasing the package, which had been one of the most heavily negotiated matters with Labour in recent months.

The Alliance's particular interests lay in protecting public-sector assets and the consumer, security of supply, an integrated energy policy and environmental protection.

Mr Hodgson said legislation would be introduced this year, and that could result in power to regulate fixed charges by autumn for implementation next winter.