Government Bill
Explanatory note
General policy statement Overview
This Bill replaces subpart 2 of Part 14 and Part 15 of the Electri-city Act 1992 and the ElectriElectri-city Industry Reform Act 1998. It also makes minor amendments to Part 4 of the Commerce Act 1986 and consequential amendments to the Gas Act 1992 and other Acts. The overall aim of the Bill is to improve competition in the electricity market and improve security of supply by—
• improving the governance arrangements for the electricity in-dustry:
• providing for specific regulatory improvements to be made: • making improvements to the overall structure of the sector. The Bill also undertakes a general tidy-up and consolidation of pro-visions relating to the electricity industry.
Background
The Minister of Energy and Resources set up a Ministerial Review of the Electricity Market (theReview) in 2009 in response to concerns about security of supply and rising electricity prices. The Review was undertaken by an Electricity Technical Advisory Group and
of-ficials. A discussion paper was released in August 2009. 130 sub-missions were received.
Following consideration of submissions, the Review concluded, in brief, that—
• although a large part of the increase in electricity prices over the last decade is justified, prices to some customer groups (es-pecially residential consumers) have risen faster than justified by underlying increases in generation costs:
• retail margins for residential consumers are high and increas-ing and competition is weak outside the main centres, partic-ularly in the South Island:
• some generators have market power in dry (low hydro inflow) years:
• although enough new generation is being built, dry years could be better managed:
• current governance arrangements are unsatisfactory and should be improved.
The Review made a wide range of recommendations to address these issues. The Government considered these recommendations and announced decisions on reforming the electricity industry in December 2009. The Government’s announcements are available on www.med.govt.nz/electricity-market-review.
This Bill implements those parts of the Government’s decisions which require legislation. It is intended to come into effect on 1 October 2010.
Electricity Industry Governance
Electricity Authority
The Bill disestablishes the Electricity Commission, which was set up in 2003 following the failure of industry self-governance, and sets up an Electricity Authority to govern the electricity industry.
The objective of the change is to improve the timeliness and quality of rule-making relating to competition, efficiency, and security of supply. This is achieved by the changes set out below.
Firstly, the objective of the Electricity Authority is much narrower than the Electricity Commission’s. The proposed objective is “to
promote competition in, reliable supply by, and efficient operation of, the electricity industry for the long-term benefit of consumers”. In contrast, the Electricity Commission had multiple objectives, in-cluding fairness, environmental sustainability, promotion of energy efficiency, and 7 other more detailed outcomes. This complicated rule-making.
The Review concluded that—
• fairness issues were best considered by Ministers (seebelow on consumer issues):
• promotion of energy efficiency should be consolidated in the Energy Efficiency and Conservation Authority (EECA): • environmental sustainability issues should be addressed
through generic environmental policy and law, in particular the Resource Management Act 1991 and climate change policy and legislation.
Secondly, the functions of the Electricity Authority are narrower and more tightly defined than the Electricity Commission’s. The aim is to improve focus on rule-making, reduce overlap with other bodies, and take advantage of synergies in performing closely-related functions. The Bill provides for the following main functions of the Authority (in general terms):
• to make and administer rules governing the electricity indus-try through an Electricity Indusindus-try Participation Code (the
Code)(seebelow):
• to monitor compliance with the Code and other provisions in the Act and regulations and take enforcement action:
• to undertake market-facilitation measures such as education and providing guidelines, information, and model arrange-ments:
• to carry out reviews, studies, and inquiries (including reviews requested by the Minister):
• to contract for market operation services (required to oper-ate the electricity wholesale market) and system operator ser-vices (provided by Transpower New Zealand Limited ( Trans-power)):
• to promote to consumers the benefits of comparing and switch-ing retailers.
Several functions currently undertaken by the Electricity Commis-sion are transferred to other bodies, as follows:
• the function of approving grid upgrade plans proposed by Transpower is transferred to the Commerce Commission. This ensures that all of Transpower’s capital expenditure (maintenance, replacement, refurbishment, and upgrades) is considered in an integrated manner by the Commerce Com-mission as part of the regulation of Transpower’s revenue requirements and costs under Part 4 of the Commerce Act 1986. (Part 4 of the Bill amends Part 4 of the Commerce Act 1986 to require the Commerce Commission to prepare rules — called an input methodology — relating to processes and evaluation criteria for Transpower’s grid upgrade plans and capital expenditure):
• the function of managing emergencies and providing infor-mation and short-to-medium term forecasting on security of supply are transferred to the system operator (which is Trans-power—seebelow). The Electricity Authority will set the re-quirements for these services in the Code:
• the function of promoting energy efficiency is transferred to the Energy Efficiency and Conservation Authority.
Thirdly, the Electricity Authority (theAuthority) is set up as an inde-pendent Crown entity under the Crown Entities Act 2004. In contrast, the Electricity Commission is a Crown agent under that Act, which is not independent from the Government (the Minister may give di-rections to the Commission and dismiss Authority members for any reason). Making the Authority independent from Government pro-vides greater certainty and predictability about how the market will be governed and operate, reduces incentives for lobbying by industry participants, and improves investor perceptions about market risk. The Bill retains the power for the Minister to make statements of gov-ernment policy, but the Authority is only required to “have regard to”, not “give effect to”, such statements. This parallels the provisions in section 26 of the Commerce Act 1986 which enable the Government to transmit statements of government policy to the Commerce Com-mission, which is also an independent Crown entity.
The Bill also enables the Minister to make written requests to the Authority to undertake a review of particular issues and report to
the Minister. This recognises that the Government continues to have a strong interest in electricity and it will help draw the Authority’s attention to matters which the Government considers may need de-tailed consideration. It parallels similar provisions in the National Electricity Law in Australia.
Electricity Authority
The Bill provides for between 5 and 7 members of the Authority to be appointed by the Governor-General on the recommendation of the Minister. The Minister is required to seek nominations for Au-thority members from interested parties and to consider those nomin-ations. The Minister must also ensure that the Authority has amongst its members knowledge and experience in the electricity industry, consumer issues, and business generally. Authority members must disclose any material conflicts of interest under the Crown Entities Act 2004 and must not represent or promote the interests of particu-lar groups.
Security and Reliability Council
The Bill requires the Authority to appoint a Security and Reliability Council, comprising senior industry people (including consumers), to provide advice on the performance of the electricity system and on security of supply issues. The purpose of setting up this council is to provide assurance to the Government, interested parties, and the Authority that senior and experienced advice is available on security of supply and system operation issues.
Advisory groups
The Bill requires the Authority to set up other advisory groups to provide advice to it on the development of the Code and on market facilitation. The Authority is also required to prepare a charter on how it will interact with advisory groups.
System operator
The Bill provides for Transpower to be the system operator. (The system operator has the critical function of co-ordinating generation, transmission, and demand to ensure security of supply in real time). Transpower currently provides this role. During consultations on the
discussion document, some submitters argued that the system oper-ator role should be contestable to help provide incentives for optimal performance. However, contestability is unlikely to be practical, in that no other party is likely to be able to provide the service on a competitive basis, and contestability potentially has a chilling effect on investments in software and long-life capital assets by the system operator. As far as is known, no other country provides for contesta-bility of system operator functions. The Bill provides that the sys-tem operator functions are subject to the performance requirements in, and enforcement provisions of, the Code.
Industry Participation Code
The Bill provides for the Authority to make and administer an Indus-try Participation Code in order to achieve its objective and functions. The Code replaces the Electricity Governance Rules 2003 (EGRs), which is the rulebook for the industry.
The key difference with the current arrangements is that the Code, unlike the EGRs, will not require the approval of the Minister be-fore coming into force. This change is consistent with increasing the independence of the Authority. Involving the Minister in approving the rules invites lobbying from parties that have been unsuccessful in the rule-making process and increases uncertainty for investors. It is also unrealistic to expect the Minister to be accountable for the rules, which are detailed and technical and extend to over 1 400 pages. This approach (the ability of the regulatory body to make rules with-out requiring approval of a Minister) is consistent with the approach taken in other jurisdictions, such as Australia (where rules are made independently by the Australian Energy Market Commission), and the UK (where the detailed conditions of licences are set independ-ently by the regulator).
The Code may apply only to industry participants and not to con-sumers generally. The Code is also subject to the Regulations (Dis-allowance) Act 1989.
The Bill requires the Authority to develop a charter on its processes for developing and consulting on proposed amendments to the Code. A regulatory statement is required for any amendments, including an evaluation of the costs and benefits of amendments and an evaluation of alternative means of achieving the objective. The requirements
can be set aside for urgent amendments (potentially important in the electricity sector), but any such amendments to the Code expire after 9 months.
The Bill provides for the initial Code (which comes into effect at the same time the Authority is established) to comprise the EGRs, spe-cific parts of the Electricity Governance Regulations 2003 (relating to the procedures of the Rulings Panel and the exemptions for the Comalco1agreements), the Electricity Governance (Security of
Sup-ply) Regulations 2008, and the Electricity Governance (Connection of Distributed Generation) Regulations 2007. The Bill also provides for the EGRs transferred to the initial Code to be modified to reflect the provisions in the Bill (for example, to reflect the changes in func-tions between the Electricity Commission and the Authority). The initial Code must be certified by the Minister and the Minister must make reasonable efforts to publish it at least 1 month before the Bill comes into force.
Industry participants must be registered with the Authority and must comply with the Code (irrespective of whether they are registered). The Bill provides a detailed list of industry participants including in-dustry service providers. It also provides regulation-making powers to identify other industry service providers as industry participants and to exempt classes of persons from requirements to register or comply with the Code. The Authority may make similar exemptions for individual parties.
Rulings Panel
The Bill provides for the continuation of the Rulings Panel estab-lished under the Electricity Governance Regulations 2003. The Rul-ings Panel is a quasi-judicial body which determines breaches of the Code and makes various remedial orders. Most of the provisions re-lating to the Rulings Panel are carried forward from the current Act or are brought up into the Bill from the Electricity Governance Regu-lations 2003.
A significant change made by the Bill is that members of the Rul-ings Panel must be appointed by the Governor-General on the joint recommendation of the Minister and the Minister of Justice. Cur-1 Now held by Rio Tinto Alcan (New Zealand) Limited, with Meridian Energy
rently the members of the Ruling Panel are appointed by the Electri-city Commission, which is not best practice, since the Commission brings enforcement action in front of the Panel. The Bill also requires the chair to be a barrister or solicitor of the High Court with at least 7 years’ standing.
Provisions relating to appeals from the decisions of the Rulings Panel are brought forward from the current Electricity Act 1992, with the addition of some further grounds (against compensation orders).
Specific new matters to be covered in the Code
The Ministerial Review recommended a lengthy list of changes that need to be made to the electricity market to improve competition and security of supply. The list is included as part of the Government’s announcements available on www.med.govt.nz/electricity-mar-ket-review. The Review noted that the Electricity Commission is in the process of consulting on and implementing most of these changes as part of its Market Development Programme.
Accordingly, there is a high degree of confidence that many if not most of these improvements will be put in place over the next 12 months or so. These will make a material difference to competition, efficiency, and reliability of supply in the market.
However, there are a number of recommended improvements where there is room for doubt that satisfactory improvements which meet the Government’s objectives will be put in place by the Electricity Commission or, subsequently, the Electricity Authority. These doubts arise mainly because the issues are highly contentious, with strongly divergent views held by industry participants. Some of the improvements (such as providing for a liquid hedge market and transmission hedges) were identified as priorities in 2003/4 when the Electricity Commission was first set up, but are still outstanding. Accordingly, the Bill sets out a short list of matters that must be ad-dressed by the Authority, and provides powers for the Minister to amend the Code if it does not do so. The matters are as follows: • provision of compensation by retailers to consumers during
public conservation campaigns. This is designed to encourage industry participants to better manage risk, and to make public conservation campaigns (which may be required in extreme dry years) more acceptable to the public:
• imposing a floor or floors on spot prices in the wholesale mar-ket during supply emergencies, including during public con-servation campaigns. This is designed to remove the current incentive on some industry participants to call early for pub-lic conservation campaigns. Campaigns lower spot prices for those participants but rely on creating a sense of crisis to work effectively and shift costs on to consumers. Like the previ-ous provision, it will encourage industry participants to better manage risk:
• mechanisms to help wholesale market participants hedge against price risks caused by transmission constraints. The absence of transmission hedges, which were an essential part of the original market design, has the effect of discouraging generator-retailers from retailing in regions where they do not have generation assets:
• mechanisms to allow participants who buy electricity in the wholesale market (that is, the demand-side) to benefit from de-mand reductions. These provisions are important to improve the overall efficiency of the market and help reduce scope for the exercise of market power by the supply-side, for example in dry years.
• requirements for distributors (lines companies) to use more standardised tariffs and use-of-system agreements. At present, lines companies, of which there are 29, have a multiplicity of differing tariff structures and business rules. These are an entry barrier for retailers, particularly in smaller regions, and reduce the level of retail competition:
• facilitating, or providing for, an active market for trading fi-nancial hedge contracts for electricity. Provision of a liquid hedge market helps industry participants manage price risk. It is a key reform to reduce entry barriers for new retailers and independent generators. The Minister has invited major gen-erators to put in place a liquid hedge market by mid 2010, but back-up powers are needed to compel the implementation of such a market if industry participants do not design and imple-ment one voluntarily.
The Bill requires the Authority to put in place amendments to the Code to implement these reforms within 1 year or provide a report to the Minister explaining why not. (The report may include the view
that suitable alternatives have been or are being put in place, or that, on further analysis, 1 or more of these provisions are unnecessary or undesirable). If the Minister is not satisfied with the outcome, the Minister may amend the Code (after the expiry of the 1 year period) to deliver on these matters. The Minister must consult with inter-ested parties and the Authority before amending the Code, and the Minister’s power is limited to a 3-year period.
Separation of distribution from certain generation and retailing
Part 3 of the Bill replaces the Electricity Industry Reform Act 1998 (EIRA). EIRA required the ownership separation of distribution (lines) businesses, which are natural monopolies, from generation and retailing, which are contestable or competitive activities. The aim of EIRA was to facilitate competition in the retailing and generation markets by removing the incentive and ability of the then integrated supply authorities to discriminate against competing retailers and generators. EIRA also sought to remove the ability to cross-subsidise retailing and generation activities from captive line customers.
The original legislation has been amended 3 times (2001, 2004, and 2008) to progressively reduce the extent of cross-ownership restric-tions. This recognised that EIRA has largely succeeded in achieving its objectives (in particular, achieving open access to lines), and that the introduction of price control under Part 4 of the Commerce Act 1986 and additional regulatory powers under the Electricity Act 1992 reduced the need for ownership separation. The current EIRA allows lines businesses to be involved in retailing without restriction outside their own network areas but capped to the quantity they generate in their own areas and subject to a number of rules.
The Review concluded that the time has come to allow lines busi-nesses back into retailing without any quantity restrictions to encour-age further retail competition (and to remove a residual 50MW cap on the quantity of thermal generation a lines business may build). However, the Review also noted that there was a danger that lines businesses with a retail and/or generation business would have the ability and incentive to discriminate against competing retailers and generators (for example by tougher use-of-system arrangements, real or perceived delays in fault repairs, and unfair use of information on the best customers), and it recommended retention of certain
restric-tions and rules to weigh against these incentives. The Government agreed with these recommendations.
The Bill accordingly repeals the Electricity Industry Reform Act 1998. This has the effect of allowing lines businesses back into retailing without quantity caps and to build any type of generation. The Bill also provides for the following restrictions:
• retention of the existing requirements in EIRA requiring cor-porate separation and compliance with arms-length rules be-tween lines and generation and retailing. The specifications relating to when these rules apply, and the arms-length rules, are carried over inSchedules 2 and 3:
• retention of the existing requirements in EIRA for distributors to put in place transparent and non-discriminatory use-of-sys-tem agreements with their own retailer and generation busi-nesses:
• retention of ownership separation between lines businesses and generators with more than 100MW of grid-connected gen-eration. The aim is to prevent large-scale vertical integra-tion between generator-retailers and lines businesses. This could have seriously negative effects on competition, espe-cially where the generator-retailer is the incumbent retailer: • prohibiting lines businesses buying the customer bases of an
existing retailer. This is a new provision. The reason for al-lowing lines businesses to retail is to benefit consumers by in-creasing the level of competition. This objective is not met if lines businesses buy-out an incumbent retailer (indeed the overall competitive situation could worsen; other new entrant retailers may be discouraged from entering if they have to deal with a lines businesses which is also an established retail com-petitor). Accordingly, this provision aims to ensure that lines businesses involved in retailing acquire customers by making them attractive offers (rather than by making attractive offers to other retailers).
The enforcement provisions are largely carried over from the existing legislation, although some provisions that are no longer required are not retained. However, the Bill provides for the Electricity Authority to enforce the provisions, not (as currently) the Commerce Commis-sion. This is part of the overall rationalisation of regulatory functions
in the Bill, with the Electricity Authority focusing on pro-competition rules and requirements, and the Commerce Commission focusing on economic regulation (price control) under Part 4 of the Commerce Act 1986.
Consumer issues
Disputes resolution
The general provisions in the Electricity Act 1992 relating to con-sumer dispute resolution schemes have been carried over to the Bill. The opportunity has been taken to update them to reflect, with modi-fications, similar provisions in more recent legislation (notably the Financial Service Providers (Registration and Dispute Resolution) Act 2008). The provisions allow for an approved industry scheme or a regulated scheme if there is no suitable industry scheme to ap-prove. The powers relating to disputes resolution schemes are, how-ever, now conferred on the Minister of Consumer Affairs rather than the Minister of Energy. The Bill similarly amends the Gas Act 1992. Continuance of supply
The Bill incorporates the provisions of the Electricity (Continuance of Supply) Amendment Bill, which was reported back from the Com-merce Select Committee in July 2009. This requires lines businesses to continue to ensure the supply of line function services (or arrange for an alternative electricity supply) to places which received such services before the 1993 electricity reforms. Without this provision, current requirements to maintain supply would expire in 2013. Powers to make regulations about tariffs and other consumer issues The Bill provides powers for the Minister, after consultation with the Minister of Consumer Affairs and the Authority, to make regulations relating to consumers for fairness reasons (for example, to ensure that retailers and distributors deal fairly with consumers in supply contracts). This is necessary because fairness is not part of the Au-thority’s objectives, which precludes it from amending the Code to cover contracts with consumers other than for efficiency-related rea-sons.
The Bill also carries over powers for regulations to be made requir-ing low fixed-charge tariff options to be made available to consumers. The Electricity (Low Fixed Charge Tariff Option for Domestic Con-sumers) Regulations 2004 are deemed to be made under this provi-sion.
The Bill also carries over 2 other regulation-making powers in the Electricity Act 1992 and the Electricity Industry Reform Act 1998 respectively. These are—
• the power to make regulations to promote accountability of customer trusts and community trusts to their beneficiaries: • the power to make regulations to restrain the rate of increase
in line charges for domestic and rural consumers. The pur-pose of this power is to discourage, and, if necessary, prevent price shocks for rural consumers that could occur if lines busi-ness implemented fully-allocated costings for line services to remote rural consumers. It enables effect to be given to the policy in the Government Policy Statement that “The Govern-ment expects distribution companies to keep any changes to rural line charges in line with changes to urban line charges”. (The price control provisions of Part 4 of the Commerce Act 1986 do not allow for constraining price increases to particular classes of consumer for fairness or equity reasons).
Neither of these regulation-powers have been used. Their retention, however, ensures that the policy objectives continue to be met in practice.
The Bill also carries over existing provisions in the Electricity Act 1992 requiring customer and community trusts to prepare audited financial statements.
SOE asset reconfiguration
The Government has decided, following consideration of the rec-ommendations of the Ministerial Review, to undertake a limited re-configuration of the assets of the 3 state-owned generator-retailers, Meridian Energy Limited, Mighty River Power Limited, and Gen-esis Energy Limited. The objective is to improve the level of market competition, particularly in the retail sector, and potentially to help improve security of supply.
The asset reconfigurations decided on by the Government are as fol-lows:
• the Tekapo A and B stations, currently owned by Meridian, are to be sold to Genesis. This is designed to provide Genesis with generation assets in the South Island, which will enable it to provide more retail competition in the South Island. (At present, the State-owned enterprise generator-retailers largely focus their retailing activities in the island where they have generation assets). It also improves diversity of views and competition regarding the value of water storage: at present Meridian owns 70% of New Zealand’s hydro storage capacity. This will reduce to 50% after the transfer:
• the Whirinaki power station, currently owned by the Crown and contracted to the Electricity Commission as reserve en-ergy, is to be sold to Meridian. This helps compensate Merid-ian for the loss of the Tekapo A and B power stations, and improves competition in the management of “peaker” power plant. The sale also dovetails with the decision of the Govern-ment to rescind the reserve energy policy, which is not carried through from the Electricity Act 1992 into the new legisla-tion. The Review, submissions on the discussion paper, and the Government agreed that the reserve energy policy has the perverse effect of reducing energy security, since it encourages parties to rely on the Electricity Commission to manage sup-ply risks rather than managing those risks themselves, and it disincentivises generators from building back-up plant: • requiring the 3 State-owned enterprises (SOEs) to enter into
one-off, long-term (up to 15 years) contracts for financial hedges. This can be regarded as a virtual asset swap, in that it has the effect of providing each of the SOEs with access to energy at fixed prices in the island (North or South) where they currently have little or no generation capacity. The aim is to facilitate and encourage the SOEs to be more active in retailing nation-wide. At present the generation assets of the SOEs are not well-balanced geographically, with Genesis and Mighty River Power having no generation in the South Island and Meridian having relatively little generation in the North Island. The SOEs have tended to focus their retail competition
in the island in which they have generation assets as a way of managing price risk.
The Government, as owner of the SOEs, will request the SOEs to undertake the above transactions. However, the Bill provides a tem-porary (1 year) power for shareholding Ministers to direct the SOEs to this effect and to set the terms and conditions of the transactions if necessary. This overrides the duties of the directors of the SOEs under the State-Owned Enterprises Act 1986 and the Companies Act 1993. The same provisions were made in Part 8 (now repealed) of the Electricity Industry Reform Act 1998 for the split of ECNZ.
Other regulation-making powers and consequential amendments to other legislation
Levies
The Bill carries forward amended powers to make regulations to re-cover costs by way of a levy on industry participants. The levy-mak-ing powers cover the costs of performlevy-mak-ing the Authority’s functions and duties, the electricity efficiency programmes transferred to the Energy Efficiency and Conservation Authority, any on-going con-tractual obligations under the reserve energy scheme, and the costs of the Ministry of Economic Development in undertaking forecast-ing and analysis for the purpose of assistforecast-ing investment plannforecast-ing by industry participants.
In addition, the powers provide for up to $15 million to be collected over 3 years to fund a campaign to promote to consumers the benefit of comparing and switching retailers. This is expected to encourage retail competition and put pressure on prices.
Overall, the costs imposed on industry participants by the levy are expected to be lower than the current levy because of the rescinding of the reserve energy provisions.
Other regulation-making powers
The Bill provides powers to regulate to provide class exemptions for industry participants from obligations to register with the Authority as market participants or to comply with the Code.
The Bill also carries forward powers from the current legislation to regulate regarding monitoring, investigating, and enforcing compli-ance with the Code, and in relation to the Rulings Panel.
Transitional provisions
The Bill provides standard transitional provisions relating to the transfer of the assets of staff, assets, liabilities, etc, of the Electricity Commission.
Consequential amendments
The Bill makes a number of consequential amendments to other le-gislation. The most important of these is an amendment to the Gas Act 1992. At present, the Gas Act 1992 provides for the Governor-General by Order-in-Council to transfer responsibilities in relation to the regulation of the gas industry to the Electricity Commission, which would be renamed the Energy Commission, if the Gas Industry Company (which is an industry-led body) fails to meet Government objectives for the gas sector. The Bill makes consequential changes relating to the Electricity Authority (and hence, Energy Authority). It also takes the opportunity to ensure that the Energy Authority, if established, includes expertise in the gas industry.
Tidy-up provisions
The Bill makes several tidy-up changes. These include—
• removing the power of the Minister of Energy under the En-ergy (Fuels, Levies, and References) Act 1989 to recommend the economic regulation of energy goods and services under Part 4 of the Commerce Act 1986. This should have been done when Part 4 was comprehensively amended in 2008:
• clarifying the provisions relating to the election of trustees to consumer and community trusts, and directors to consumer co-operatives, under Part 4 of the Commerce Act 1986. (Under Part 4, lines businesses owned by trusts or cooperatives are exempt from price control on the grounds that they are ultim-ately controlled, through election processes, by the consumers they serve).
Conclusion
The Bill makes wide-ranging changes, but of an evolutionary and fine-tuning nature, to put in place improved governance and regula-tory provisions for the electricity industry. The overall objective is to improve competition, efficiency, and reliability of supply in the sector, for the long-term benefit of consumers of New Zealand.
Clause by clause analysis
Clause 1is the Title clause.
Clause 2provides that the Act commences on1 October 2010. Clause 3provides that the Act binds the Crown.
Part 1
Preliminary provisions
Clause 4provides that the purpose of the Act is to provide a frame-work for the regulation of the electricity industry.
Clauses 5 to 9set out various matters of interpretation.
Part 2
Electricity Industry Governance
Subpart 1—Who does what
Subpart 1identifies the main players in the regulation of the electri-city industry (ie, industry participants, the Electrielectri-city Authority, and the Rulings Panel) and what their roles are.
Industry participants
Clause 9 identifies the industry participants for the purpose of this Act. As well as the obvious ones (generators, Transpower, distribu-tors, and retailers), there are a number of other participants including industry service providers. These have highly technical roles within the industry. Some are identified inclause 9as industry participants, and regulations can be made identifying others.
Clause 10identifies that Transpower (the owner and operator of the national grid) is the system operator.
Clause 11identifies the 2 basic obligations of every industry partici-pant. They are—
• to register with the Authority: • to comply with the Code.
Clauses 12 and 13 provide for exemptions from these obligations. Exemptions can be either class exemptions, which must be made by regulations, or individual exceptions, which must be made by the Au-thority byGazettenotice. Exemptions from the Code may be partial.
Electricity Authority
Clauses 14 to 21are about the Electricity Authority which replaces the existing Electricity Commission. It is to be an independent Crown Entity, but must have regard to statements of Government policy concerning the electricity industry. Its functions are described in the general policy statement. It has specific powers to require persons to co-operate with it in performing its monitoring, etc, functions.
Security and Reliability Council, and other advisory groups
Clauses 22 to 25 require the Authority to establish a Security and Reliability Council and allow it to set up other advisory groups.
Rulings Panel
Clauses 26 to 29 provide for the continuation of the Rulings Panel that is currently established under the Electricity Governance Regulations 2003. The transitional provisions provide that the current members remain in office but are deemed to be appointed under clause 27. The functions and funding of the Rulings Panel are dealt with in these clauses, but the details about the Panel’s membership, operation, and procedures will remain in regulations. These are intended to largely replicate the equivalent provisions in the Electricity Governance Regulations 2003.
Subpart 2—Registration
Clauses 30 to 34 set out the information that industry participants must provide, and keep up to date, for registration purposes.
Infor-mation contained in the existing register maintained by the Electri-city Commission will be transferred into the new register. Unlike the present situation, industry participants are obliged to comply with the Code whether or not they are registered. Non-registration is an of-fence.
Subpart 3—Electricity Industry Participation
Code
Clauses 35 to 46are about the content, status, making, and amending of the Code. The Code’s features, and how it is made and amended, are described in the general policy statement.
Clause 47carries forward section 172KA of the Electricity Act 1992, which allowed Electricity Governance Rules to require Transpower to enter into transmission agreements relating to the national grid.
Subpart 4—Monitoring and enforcing Code
Authority’s powers and proceduresClauses 48 to 54set out the Authority’s powers in relation to moni-toring and enforcing the Code. The Authority may seek an interim injunction against an industry participant in relation to a breach of the Code. It may also suspend a generator’s or purchaser’s rights to bid or offer under the Code in certain circumstances (such as insol-vency). The Authority may require industry participants to provide information, permit their officers and employees to be interviewed, allow access to premises, and provide all other assistance to enable the Authority to carry out its functions and exercise its powers. The detailed procedures relating to monitoring compliance with and en-forcing the Code will be set out in regulations that largely replicate the current provisions of Part 4 of the Electricity Governance Regu-lations 2003. However, protections for industry participants (for ex-ample, maintenance of legal professional privilege) are set out in the Bill.
Rulings Panel’s powers and procedures
Clauses 55 to 63 are about the Rulings Panel. The Rulings Panel hears complaints about breaches by industry participants of the Code and regulations. It has remedial powers including the power to order
payment of a pecuniary penalty of up to $2 million, to make compli-ance and compensation orders, and to terminate rights to bid or offer under the Code. These are the same remedial powers as it currently has and they will continue to be subject to limitations set out in the regulations. The procedures of the Rulings Panel are, and will con-tinue to be, set out in regulations.
Appeals
Clauses 64 to 73are about appeals from the decisions of the Rulings Panel. They largely replicate the current provisions of the Electricity Act 1992.
Part 3
Separation of distribution from certain
generation and retailing
Part 3replaces, with various changes, the rules relating to separation of industry activities (previously in the Electricity Industry Reform Act 1998).
Subpart 1—Separation of distribution from
certain generation and retailing
Subpart 1contains the separation and other rules. The main rules are as follows:
• ownership separation rules if a person is involved both in a distributor and in a generator with more than 100 MW of gen-eration connected to the national grid:
• corporate separation and arm’s-length rules if a person is in-volved both in a distributor and in either or both of—
(a) a generator that generates more than 10 MW of gener-ation connected to the distributor’s network:
(b) a retailer that retails more than 5GWh per year to cus-tomers connected to the distributor’s network:
• use-of-systems agreement rules if a connected retailer retails more than 5 GWh per year to customers connected to the dis-tributor’s network:
• rules preventing persons involved in distributors from paying retailers in respect of the transfer of the retailer’s customers:
• no-discrimination rules that apply when distributors, and elec-tricity trusts or customer co-operatives that own them, pay dividends or rebates.
Subpart 2—Enforcement and general
provisions
Subpart 2relates to enforcement. The main features are as follows: • various remedies are available from the High Court. These are
pecuniary penalties, injunctions, damages, and other orders. These remedies are carried forward from the Electricity In-dustry Reform Act 1998:
• sections 54 (Court may order divestiture of assets or voting se-curities) and 55 (additional penalty for contravention involv-ing commercial gain) of the Electricity Industry Reform Act 1998 are not carried forward, as they are no longer necessary: • the maximum pecuniary penalty that the High Court may order under this subpart remains, for a corporate, the greater of $10 million or 3 times the value of any commercial gain or 10% of turnover. The maximum amount has, since 1998, been linked to the maximum amount for pecuniary penalties that can be ordered under section 80 of the Commerce Act 1986 in respect of restrictive trade practices. The maximum amount under section 80 of that Act has been as described above (ie, $10 million, etc) since 2001:
• appeals against High Court decisions under this subpart can be made in accordance with the general rules in the Judicature Act 1908 about appeals to the Court of Appeal:
• the major change in this subpart of the Bill is that responsi-bility for initiating enforcement of this Part will shift to the Authority, from the Commerce Commission:
• various provisions of the Commerce Act 1986 are applied to enforcement of the Part with necessary modifications, for ex-ample, investigatory powers. These are the same provisions that were applied when the Commerce Commission had re-sponsibility for initiating enforcement:
• disclosure under the Part must be made to the Authority, rather than the Commerce Commission:
• responsibility for granting exemptions from the Part will also shift to the Authority, from the Commerce Commission.
Part 4
Industry participants and consumers
Subpart 1—Dispute resolution
Clauses 97 to 100relate to dispute resolution schemes for consumers and others. They are based on provisions in the Financial Service Providers (Registration and Dispute Resolution) Act 2008 and re-place section 158G of the Electricity Act 1992. Transpower and every distributor and retailer must be a member of the scheme. The scheme is either an approved scheme (designed and established to deal with both electricity and gas) or the regulated scheme. The de-tails about these alternatives are set out inSchedule 4. Any person other than a member may take a complaint to the scheme. No fee may be charged for investigating or resolving a complaint. If reso-lution is not achieved by mutual consent and a binding settlement is ordered, it can be enforced through a District Court order. If the order is for payment of money, the order can be enforced as a judgement. Failure to comply with any other order is an offence.
Subpart 2—Financial statements of customer
and community trusts
Clauses 101 to 106relate to the financial statements of customer and community trusts (which are carried forward from sections 158A to 158F of the Electricity Act 1992).
Subpart 3—Continuance of supply
Clauses 107 to 110replace section 62 of the Electricity Act 1992. A replacement for section 62 was set out in the Electricity (Continuance of Supply) Bill. That Bill was introduced in 2008 and reported back from the Select Committee in April 2009, with the recommendation that the Bill be passed with the amendments shown. Clauses 107 to 110replicate the amended version of the provisions, with only those amendments necessary to align the text with this Bill and to improve the drafting.
Subpart 4—Price restraint for line charges
for domestic and rural consumers
Clauses 111 to 115set out provisions to enable price restraint for line charges for domestic and rural consumers. These are carried forward without change from sections 88 to 93 of the Electricity Industry Reform Act 1998 and are discussed in the general policy statement.
Part 5
Miscellaneous
Subpart 1—Regulations
Clauses 116 to 122set out regulation-making powers relating to dif-ferent aspects of the Bill.
Clause 117provides for class exemptions from the obligation on in-dustry participants to—
• register:
• comply with the Code or specific provisions of the Code. Clause 118provides for class exemptions from the obligation to be a member of a dispute resolution scheme.
Clause 119 provides for regulations relating to the monitoring and enforcement of the Code. This clause authorises the making of the regulations that will replace Parts 4 to 8 of the Electricity Governance Regulations 2003.
Clause 120provides for regulations relating to consumer issues. It includes a regulation-making power that would authorise the making of the current Electricity (Low Fixed Charge Tariff Option for Do-mestic Consumers) Regulations 2004. These regulations will con-tinue in force under the new Act. It provides for regulations regulat-ing distributors’ and retailers’ dealregulat-ings with consumers and requirregulat-ing their compliance with policies, practices, procedures, etc.
Clause 121provides for regulations (equivalent to those that could be made under section 172C of the Electricity Act 1992) ensuring accountability by electricity trusts.
Subpart 2—Miscellaneous
State-owned enterprise asset reconfiguration
Clauses 123 to 125contain provisions enabling Ministerial directions to be given in respect of the reconfiguration of the generating assets of State-owned generation, as discussed in the general policy statement.
Levy of industry participants
Clauses 126 and 127contain provisions relating to industry levies.
Authorisation for restrictive trade practices rule
Clause 128 replicates section 172ZR of the Electricity Act 1992. Section 43 of the Commerce Act 1986 provides that Part 2 of that Act (Restrictive trade practices) does not apply to things specifically authorised under an enactment. Clause 128 specifically authorises acts done or omitted by the Electricity Authority, the Rulings Panel, or an industry participant in relation to this Act, regulations made under it, or the Code.
Subpart 3—Transitional and consequential
provisions
Dissolution of Electricity Commission
Clauses 129 to 135provide for the dissolution of the Electricity Com-mission and the transfers of its employees, assets, liabilities, etc, to the Electricity Authority.
Rulings Panel
Clauses 136 and 137provide for the continuance of the Rulings Panel and any investigations and proceedings before it.
Commerce Commission
Clauses 138 and 139 provide for the transfer from the Commerce Commission to the Authority of matters under investigation under the Electricity Industry Reform Act 1998, and the continuance of exemptions granted under that Act.
Subpart 4—Amendments to other
enactments
Amendments to Commerce Act 1986
Clauses 140 to 150make amendments relating to subpart 9 of Part 4 of the Commerce Act 1986, which is about the regulation of electri-city lines services (ie, transmission and distribution). The substantive amendments to sections in that subpart are as follows:
Clause 142 amends section 52T so that input methodologies about pricing methodologies may not be set if pricing methodologies are set out by industry-specific regulators (such as the Authority). Clause 144amends section 54C, which defines electricity lines ser-vices, to clarify that the term includes—
• services performed by Transpower as system operator; and • the supply of electricity from an alternative source (in
pur-suance of the continuance of supply obligation inclause 107). Clauses 145 and 146amend sections 54D and 54H to make refine-ments to the definition of consumer-owned. Lines companies that are consumer-owned are subject only to information disclosure regula-tion and not price-quality regularegula-tion under the Commerce Act 1986. Clause 147 repeals section 54M(6), which is added tonew section 54Vinstead. The provision is an on-going requirement that allows the Authority (rather than the Commerce Commission) to set the quality standards for Transpower.
Clause 148repeals the provisions that deal with jurisdiction issues and the interface between on the one hand the Commerce Commis-sion and the Commerce Act 1986 and on the other hand the Electri-city Commission and the ElectriElectri-city Act 1992 (sections 54R to 54U of the Commerce Act 1986). They are replaced by provisions that— (a) give the Commerce Commission (rather than the Electricity Commission) obligations relating to the approval of Trans-power’s grid upgrade plans and capital expenditure proposals (new section 54R); and
(b) require the Commerce Commission to determine an input methodology relating to those plans and proposals.
Clause 149substitutes anew section 54Vdealing with the interface between the Commerce Commission and the Electricity Authority. Clause 150 amends the regulation-making power to authorise the Commerce Commission to refund parts of application fees.
Amendments to Energy (Fuels, Levies, and References) Act 1989
Clauses 151 to 153make amendments to the Energy (Fuels, Levies, and References) Act 1989—
• to repeal Part 2 (which provides that the Minister of Energy must exercise, in respect of a range of different types of energy, powers under the regulated goods and services provisions of the Commerce Act 1986 that are conferred by that Act on the Minister of Commerce:
• to add a new purpose for which industry levies may be collected, namely the dissemination by the Ministry of infor-mation to assist consumers to choose, and alternate, between competing gas retailers.
Amendments to Electricity Act 1992
Clauses 154 to 157makes 2 substantive amendments to the Electri-city Act 1992 and also consequential ones. The substantive amend-ments are:
• a replacement definition of electrical installation, to clarify a long-standing ambiguity:
• provisions that will allow different Ministers to make different codes of electrical practice.
Miscellaneous provisions and Schedules
Clause 158 provides for the repeal of the Electricity Reform Act 1998.
Clause 159provides that other enactments are amended as set out in Schedule 5.
Schedule 1sets out provisions relating to incorporation by reference. These provisions will apply to material incorporated by reference into the Code or regulations.
Schedule 2contains rules for determining when a person is involved in a distributor, a generator, or a retailer for the purpose of the rules in Part 3relating to the separation of industry activities. These provi-sions are based on those currently in the Electricity Industry Reform Act 1998.
Schedule 3contains the arm’s-length rules (which are carried forward with no major amendments from the arms-length rules in the Electri-city Industry Reform Act 1998).
Schedule 4 contains provisions relating to dispute resolution schemes, and are based on those in the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
Schedule 5contains amendments to other enactments. They include amendments to the Gas Act 1992 to—
• align the provisions relating to dispute resolution in the gas in-dustry with the provisions in the Bill relating to dispute reso-lution in the electricity industry. It is a mandatory consider-ation for approval of a dispute resolution scheme under the Bill that the scheme should be an integrated scheme for the reso-lution of complaints in both the electricity and the gas sector (see Schedule 4):
• replace references to the Electricity Commission with refer-ences to the Electricity Authority. Currently, the Gas Act 1992 provides for a co-regulatory model for the gas industry and for an industry body (rather than a Crown entity) to govern it. But there are back-stop provisions in subpart 3 of Part 4A of that Act that entitle the Government to activate instead an Energy Commission to govern the gas industry if co-regulation were ever discontinued. Because the Electricity Authority is an in-dependent Crown entity rather than a Crown agent, the amend-ments inSchedule 5provide for up to 2 additional members to be appointed with expertise in the gas industry. The current procedures in the Gas Act 1992 in relation to making gas gov-ernance regulations and rules continue unchanged.
Regulatory impact statement: Executive summary and links
This regulatory impact statement is a short executive summary that builds upon the more comprehensive regulatory impact statement that accompanied the Cabinet papers approved on 7 December 2009. The full text of those documents can be found on:
• www.med.govt.nz/electricity-market-review-ris; and • www.treasury.govt.nz/publications/informationreleases/ris.
On 30 March 2009 Cabinet agreed to terms of reference for a Min-isterial review of the electricity market by the Ministry of Economic Development (MED) and an Electricity Technical Advisory Group (ETAG) appointed by the Minister of Energy and Resources. On 27 July 2009, EGI agreed to release a discussion paper prepared by the review team and invited the Minister to report back on recommenda-tions by 30 November 2009.
This Cabinet paper makes recommendations taking into account the final views of the review team. The main conclusions and recom-mendations are as follows.
Prices, costs, and competition
The review concluded that although a large part of the increase in electricity prices over the last decade is justified, prices to some customer groups (especially residential consumers) have risen faster than justified by underlying increases in generation costs. Residen-tial margins are high and competition between retailers is weaker outside the main centres, particularly in the South Island. Some generators have market power in the wholesale market in dry years. The main recommendations to improve competition are:
• improve retail and wholesale market competition through SOE asset re-allocations as follows:
• transfer the Tekapo A and B power stations from ian to Genesis and sell the Whirinaki station to Merid-ian:
• require Meridian, Genesis and Mighty River Power to undertake ‘virtual asset swaps’ (covering up to 20 per-cent of residential demand) by way of long term (15 year) contracts:
• introduce a more liquid hedge market:
• allow lines companies back into retailing subject to measures to prevent anti-competitive behaviour against competing re-tailers:
• provide for more demand-side participation in the wholesale market:
• encourage consumers to shop around, particularly through an annual $5 million contestable fund (levy funded) to facilitate switching between retailers:
• facilitate the development of smart meters and more tariff op-tions for consumers (to enable them to better manage demand): • introduce a transmission hedging mechanism to encourage more retail competition in areas subject to volatile wholesale prices because of transmission constraints.
Security of supply
The review concluded that enough new generation is being built to maintain security of supply but that dry years could be better man-aged.
The main recommendations to improve security of supply are— • abolish the reserve energy scheme:
• require retailers to compensate consumers during any official conservation campaigns:
• introduce a floor on spot prices during conservation campaigns and outages:
• develop terms and conditions for access to ’reserve water’ in Lakes Pukaki and Hawea in dry year emergencies.
Governance
The review concluded that current governance arrangements are un-satisfactory. The Electricity Commission (EC) has too many func-tions and objectives; in some instances funcfunc-tions could be more ef-fectively undertaken by other bodies; and generally the EC is seen as slow in making improvements to the market.
The main recommendations to improve governance arrangements are—
• disestablish the EC and set up an Electricity Market Authority (EMA) as an Independent Crown Entity to focus on market facilitation, monitoring and rule-making:
• transfer a number of functions to other bodies, in particular ap-proval of grid upgrade proposals to the Commerce Commis-sion as part of its overall regulation of Transpower’s revenues and expenditure; promotion of electricity efficiency to EECA; and management of emergencies and forecasting to the Sys-tem Operator (part of Transpower):
• set up a Security and Reliability Council comprising senior industry people to assist in monitoring the performance of the System Operator and advising on security of supply.
Legislation will be required to implement the recommendations in this paper. It is proposed to introduce legislation before Christmas with the aim of passage and implementation by 1 October 2010.
Electricity Industry Bill
Government Bill Contents Page 1 Title 8 2 Commencement 83 Act binds the Crown 8
Part 1
Preliminary provisions
4 Purpose 9
5 Interpretation 9
6 Definitions of industry service providers identified in section 9
12 7 References to electricity industry 14
8 Extended meaning of breach 14
Part 2
Electricity industry governance
Subpart 1—Who does what
Industry participants
9 Industry participants 14
10 Transpower is system operator 15
11 Obligations of industry participants 16 12 Exemption from obligation to register 16 13 Exemption from obligation to comply with Code 16
Electricity Authority
14 Authority established 17
16 Independence of members 18
17 Objective of Authority 18
18 Functions of Authority 18
19 Statements of Government policy 19 20 Reviews on request of Minister 20
21 Co-operation with Authority 20
Security and Reliability Council, and other advisory groups
22 Charter about advisory groups 21
23 Security and Reliability Council 21
24 Other advisory groups 22
25 Application of Crown Entities Act 2004 22
Rulings Panel
26 Continuation of Rulings Panel 23
27 Membership of Rulings Panel 23
28 Functions of Rulings Panel 23
29 Funding of Rulings Panel 23
Subpart 2—Registration
30 Register of industry participants 24 31 Transfer of old information to register 24 32 Registration and requirement to update information 25
33 Ceasing to be registered 25
34 Offences relating to registration 25 Subpart 3—Electricity Industry Participation Code
Content and status of Code
35 Content of Code 26
36 Status of Code 27
Making and amending Code
37 Content of initial Code 27
38 Certification of draft Code 27
39 Code comes into force 28
40 Making Code accessible 28
41 Authority amends Code 28
42 Consultation on proposed amendments 29
43 Urgent amendments to Code 29
Specific new matters in Code
45 Specific new matters to be in Code 30 46 Minister may amend Code to include new matters 31
Other specific content
47 Transmission agreements 32
Subpart 4—Monitoring and enforcing Code
Authority’s powers and procedures
48 Investigation of complaints: procedure in regulations 32
49 Interim injunctions 33
50 Authority may suspend trading in case of insolvency 33
51 Investigative powers 34
52 Persons authorised by Authority 35
53 Privileges protected 36
54 Limitation periods for breaches of Code 36
Rulings Panel’s powers and procedures
55 Bringing complaints and disputes to Rulings Panel 37 56 Remedies and orders of Rulings Panel 37
57 Restrictions on remedies 38
58 Pecuniary penalty orders 39
59 Offence to breach compliance orders 39 60 Suspension and termination for breach of Rulings Panel
orders
40 61 Effect of suspension and termination orders 40 62 Offences relating to suspension and termination orders 40
63 Orders generally 41
Appeals
64 Appeal on ground of lack of jurisdiction 41
65 Appeal on question of law 41
66 Appeal against certain orders of Rulings Panel 41
67 How and when appeals made 42
68 Determination of appeals 42
69 High Court may refer appeals back for reconsideration 42 70 Provisions pending determination of appeal 42 71 High Court may order proceedings be heard in private 43 72 Appeal to Court of Appeal in certain cases 43
Part 3
Separation of distribution from certain generation and retailing
Subpart 1—Separation of distribution from certain generation and retailing
Purpose and outline of Part
74 Purpose and outline of this Part 44
Interpretation of Part
75 Interpretation in this Part 45
76 Meaning of involved in 46
Ownership separation
77 Ownership separation 47
Corporate separation and arm’s-length rules
78 Corporation separation and arm’s-length rules applying to distributors and connected generators and connected retailers
47
Other rules
79 Use-of-systems agreements 48
80 Person involved in distributor must not pay for transfer of retail customers to connected retailers
49 81 No discrimination when paying rebates or dividends 49
Subpart 2—Enforcement and general provisions
Enforcement and penalties for this Part
82 Pecuniary penalties 50
83 Injunctions 51
84 Actions for damages 52
85 Other powers to give directions, reopen agreements 52 86 Miscellaneous provisions relating to civil proceedings
under this Part
52 87 Application of Commerce Act 1986 provisions 53
88 Additional proceedings 53
Territorial application of this Part
89 Application to persons outside New Zealand 54
Disclosure and reporting to Authority
90 Disclosure of information to Authority 54 91 Directors must report compliance with arm’s-length rules 54
Exemptions
92 Exemptions 55
Application of other Acts
93 Application of Commerce Act 1986 56 94 Not interconnected under Commerce Act 1986 56
95 Illegal Contracts Act 1970 56
96 Substance matters, not form 56
Part 4
Industry participants and consumers
Subpart 1—Dispute resolution
97 Complaints about Transpower, distributors, and retailers 57 98 Membership of dispute resolution scheme 57 99 Compliance with rules and binding settlements 58 100 Offence to fail to comply with District Court order 58
Subpart 2—Financial statements of customer and community trusts
101 Customer and community trusts must prepare audited financial statements
59 102 Publication of audited financial statements 59
103 Auditor of trusts 59
104 Procedures for annual meeting to appoint auditor 60 105 Auditor-General to be auditor if no other auditor
appointed
61 106 Offences and application of sections 104 to 108 61
Subpart 3—Continuance of supply
107 Continuance of distributors’ supply obligation 62 108 Cessation of supply obligation 63 109 Proposal to supply electricity from alternative source 63 110 Application of enactments to distributors subject to
obligation in section 107(2)
64 Subpart 4—Price restraint for line charges for domestic
and rural consumers
111 Purpose of subpart 65
112 Regulations relating to charges for line function services 65 113 Way in which price restraint may be imposed 66
114 Offences 67
115 Other Acts relating to regulated goods or services not affected
Part 5 Miscellaneous
Subpart 1—Regulations
116 Regulations identifying industry service providers as industry participants
68 117 Class exemptions relating to sections 11 and 12 68 118 Class exemption relating to section 98 68 119 Regulations relating to monitoring, investigating, and
enforcing Code
69 120 Regulations about tariffs and other consumer issues 69 121 Regulations promoting accountability in customer trusts
and community trusts
70 122 General regulation-making powers 71
Subpart 2—Miscellaneous
State-owned enterprise asset reconfiguration
123 Interpretation for section 124 72 124 Directions by shareholding Ministers 72 125 Obligation of Authority relating to Whirinaki 74
Levy of industry participants
126 Levies 74
127 Each Authority must consult about request for appropriation
76
Authorisation for restrictive trade practices rules
128 Specific authorisation for purposes of restrictive trade practices rules
77
Subpart 3—Transitional and consequential provisions
Dissolution of Electricity Commission
129 Interpretation 77
130 Electricity Commission disestablished 78
131 Consequences of dissolution 78
132 References to Electricity Commission 79
133 Transferred employees 80
134 Government Superannuation Fund 81 135 Complaints, investigations, etc 81
Rulings Panel
136 Members of Rulings Panel 82
Commerce Commission
138 Investigations relating to separation of distribution from generation and retailing
82 139 Exemptions granted under Electricity Industry Reform
Act 1998
82 Subpart 4—Amendments to other enactments
Amendments to Commerce Act 1986
140 Amendments to Commerce Act 1986 83
141 Interpretation 83
142 Matters covered by input methodologies 83
143 Interpretation for subpart 83
144 Meaning of electricity lines services 84
145 Definition of consumer-owned 84
146 How exempt status can be lost and default/customised price-quality regulation can be applied to consumer-owned suppliers
86
147 Administrative settlements with Transpower made before 1 April 2009
86 148 New heading and sections 54R and 54S substituted 87
Transpower grid upgrades
54R Approval of Transpower’s grid upgrade plans and capital expenditure proposals
87 54S Commerce Commission to prepare input
methodology for grid upgrade plans and capital expenditure proposals
87
149 New section 54V substituted 88
Interface with Electricity Industry Act2009 54V Impact of certain decisions made under Electricity
Industry Act 2009
88
150 Regulations 89
Amendments to Energy (Fuels, Levies, and References) Act 1989
151 Amendments to Energy (Fuels, Levies, and References) Act 1989
90
152 Part 2 repealed 90
153 Purpose of levies 90
Amendments to Electricity Act 1992
155 Interpretation 90
156 New section 43A inserted 90
43A Different Ministries responsible for different codes
90 157 Consequential amendments and repeal of spent provisions 91
Repeal of Electricity Industry Reform Act 1998
158 Repeal of Electricity Industry Reform Act 1998 91
Amendments to other enactments
159 Amendments to other enactments 91
Schedule 1 92
Material incorporated by reference
Schedule 2 95
When person is involved in distributor, generator, or retailer for purposes of Part 3
Schedule 3 105
Arm’s-length rules
Schedule 4 111
Dispute resolution scheme
Schedule 5 121
Amendments to other enactments
The Parliament of New Zealand enacts as follows: 1 Title
This Act is the Electricity Industry Act2009.
2 Commencement
This Act comes into force on1 October 2010.
3 Act binds the Crown 5
Part 1
Preliminary provisions
4 PurposeThe purpose of this Act is to provide a framework for the
regu-lation of the electricity industry. 5
5 Interpretation
In this Act, unless the context otherwise requires,—
Authority, or Electricity Authority, means the Electricity Authority established bysection 14
breachhas the meaning given insection 8 10
Code, or Electricity Industry Participation Code, means the Code administered by the Authority, as brought into force undersection 39and amended from time to time under sec-tions 41, 43, or 46
clearing managermeans the person appointed by the Author- 15 ity to act as the clearing manager under the Code
community trust, in relation to a distributor or a retailer, means a trust in respect of which—
(a) at least 90% of the income beneficiaries comprise per-sons who are a class or classes identified by reference to 20 their domicile or location or operation within the geo-graphic area or areas of operation of the distributor or retailer; and
(b) at least 90% of its income distributions are paid to those beneficiaries or for purposes related to that geographic 25 area or areas
consumermeans any person who is supplied, or applies to be supplied, with electricity other than for resupply
customer co-operative, in relation to a distributor or a retailer, means a co-operative company (as defined in section 2(1) of 30 the Co-operative Companies Act 1996) that has the character-istics described in the definition of customer trust in this sec-tion, applied as if references to trusts were to co-operatives, references to income beneficiaries were to shareholders, and all other necessary modifications were made 35