Watchdog's rejection seen as temporary

By CHRIS DANIELS energy writer

A new plan for regulating the electricity sector has been knocked back by the Commerce Commission, but people in the industry say it is only a temporary setback.

The commission has just released a "draft determination" on plans for an Electricity Governance Board.

It found that the risks of such a group being anti-competitive outweighed any public benefit that might come from such a group being established.

An Electricity Governance Establishment Committee, chaired by former Labour Minister David Caygill, must now alter its planned "rulebook" before it can proceed.

Setting up a governing body is one of the dreams of Energy Minister Pete Hodgson, who has so far been content to let the industry organise its own affairs.

He has, however, regularly threatened to use his wide powers of regulation to bring the electricity industry into line if it does not adequately manage its own affairs.

A governance board would bring together the three existing power industry agreements that cover the operation of the wholesale electricity market, and metering and technical protocols.

It would include consumer representatives and would oversee the operation of all aspects of the electricity market, run a judicial system and try to foster competition in the industry.

Caygill said yesterday that the Commerce Commission's decision not to endorse the proposed rulebook should not be seen as a major setback.

"We're on track in time terms, we've had a clear steer from the commission, that's what we were waiting for.

"The result is not a disaster - on the contrary it tells us exactly what the commission was concerned about," he said.

The commission decided that the proposed board structure could allow too much domination by the industry's big names - those "vertically integrated" companies that generate and sell electricity.

While the commission did not think the plan allowed big companies to design rules to shut out smaller companies, it said that they could join forces to vote down rules proposed by smaller members.

These big companies, who already feel they have made numerous compromises to avoid expensive and onerous Government regulation, must now decide if they can bear going even further - this time to get a blessing from the Commerce Commission.

A spokesman for Hodgson said the Commerce Commission's draft determination was "not unexpected".

"It was never assumed it would go straight through," he said.

"It's not viewed at this stage as a major setback."