Government seeks power to seize reins over electricity industry

The Government will change the law to let it step in over the top of the country's electricity regulator, amid concerns the power industry may still not be on the right track.

Orginally published on stuff.co.nz 
https://www.stuff.co.nz/business/119527625/government-seeks-power-to-seize-reins-over-electricity-industry

Energy Minister Megan Woods set out the details of the power it was seeking in a wide-ranging Cabinet paper that also flagged a delay to a controversial plan to phase out electricity tariffs aimed at low-usage customers, and a fresh review of institutions governing the industry.

Power users will get a "consumer advocacy council" to advocate for residential electricity users and small businesses, and possibly a new hardship fund to help low income households improve the energy efficiency of their homes.

Woods said long-standing issues in the electricity industry had proven challenging to address and consumers were struggling to exert influence over decisions affecting them.

A survey published by the Electricity Authority in January found only 41 per cent of consumers gave the industry a score of more than "five out of 10", when asked whether they thought the electricity market ensured electricity was generated and supplied efficiently.

The response was the most negative since the authority began polling consumers on that question in 2011.

A Stuff reader poll suggested less than a fifth of respondents believed the structure of the electricity industry in New Zealand was near-enough right.

Cabinet has agreed to change the Electricity Industry Act to give Woods the power to override the Electricity Authority and directly amend the electricity code that governs the industry for a period of two years.

That would, for example, let her step in to directly improve the wholesale market or stop "gentailers" from offering last minute deals to "win back" defecting customers.

The Cabinet paper said officials had expressed reservations about establishing the backstop regulatory power, but Woods said it would only be used "after the Electricity Authority has had a reasonable period of time in which to make satisfactory progress".

Woods said there was a precedent for the new power as it mimicked "what was done with the establishment of the Electricity Authority in 2010".

Electricity Authority chief executive James Stevenson-Wallace said the authority did not see the impending law change as an expression of no confidence in the authority's work.

"The detail of this Cabinet paper is not a surprise to the authority. The Government signalled its intention of a backstop regulatory power in its response to the Electricity Price Review final report in October.

"We see it as an opportunity to continue working, at pace, on regulations that will have a positive impact on consumers," he said.

Flick Electric chief executive Steve O'Connor said he not believe the Electricity Authority had been "bang on" in implementing the recommendations of the Electricity Price Review to date.

"But I think we are now getting indications they are moving at speed.

"We want to remain supportive at this point in time, but we do need to see the outcomes."

The Electricity Pricing Review did not identify "any major concerns" with existing institutional arrangements over the industry.

But Cabinet has ordered a review of the "status quo" by the end of the year.

"I believe it is crucial we take a forward-looking perspective," Woods said.

"Fit for purpose institutions will be a key factor in achieving the transition to a low carbon-economy."

The Electricity Price Review recommended ending the requirement for power companies to offer tariffs with low daily-fixed charges and higher per-kilowatt pricing.

These are designed to favour consumers who use less than 8000 kilowatt-hours of power per year.

About 60 per cent of households are understood to be on the plans.

But Woods said she had delayed drafting specific proposals to phase out the regulation.

She indicated she still supported the recommendation but would "take time" to engage with those who might be affected, noting the change would increase costs for households that use little electricity "including some already in energy hardship".

The earliest any phase out of low-use tariffs could begin was April next year, she said.