Power standoff 'may put $3b investment at risk'

The standoff between the Electricity Commission and Transpower over proposed grid upgrades could lead to underinvestment in the network, the international debt-rating agency Standard & Poor's has warned.

In a report on the New Zealand utility sector, the agency highlighted the regulator's recent rejection of the proposed 400kV line between Waikato and Auckland as a dispute that heightened uncertainty over the regulatory landscape.

"[The disagreement] may endanger a $3 billion to $4 billion medium-term investment that Transpower in its capacity as protector of network reliability insists is necessary."

Standard & Poor's view on the electricity sector is relevant because the rating it attaches to Transpower and other companies' debt has a significant influence on how much interest they have to pay on loans.

Meanwhile, a review by the International Energy Agency (IEA) has generally praised New Zealand's energy policies.

However, the agency, an autonomous body within the Organisation for Economic Co-operation and Development, has called for several changes to lift the regulatory regime up to best practice.

It said the Electricity Commission was an institution better equipped to make necessary regulatory reforms, but it called for greater independence from the Government.

It highlighted the Government's ability to remove commissioners as a cause for concern.

It also called for New Zealand to honour its obligations to maintain a 90-day reserve for oil stocks. At present New Zealand is the worst offender in IEA member states, executive director Claude Mandil said.

Energy Minister David Parker said: "I am pleased to note that many of the recommendations made by the IEA are already part of the Government's policy, or are under active policy development."

The IEA report was prepared following a visit to New Zealand last October by a team of energy experts from Ireland, Norway, Belgium, Germany and the IEA's headquarters in Paris.

New Zealand was last reviewed in 2001.