Recent developments in the electricity sector

An overview of decisions, discussion documents and terms of reference released in the electricity sector over this quarter.

Commerce Commission agrees administration settlement with Unison Networks

The Commerce Commission has decided not to place electricity lines company Unison under formal price control in exchange for Unison agreeing essentially to a form of informal price control under which it has agreed to:

• reduce its average prices for electricity distribution services; and

• to rebalance its line charges to different regions and customer groups, so that the prices paid by consumers better reflect the costs of supplying them.

For background and further information on the terms of this settlement visit the Commerce Commission’s website at www.comcom.govt.nz.

Review of clause 62 of the Electricity Act underway

In March, the Government released its Terms of Reference for the consideration of what, if any, arrangements should be put in place when the statutory obligation in clause 62 of the Electricity Act 1992 requiring lines companies to supply line function services to places supplied in April 1993 expires in 2013. The Government wants to ensure that any community affected by the repeal of this clause continues to have an electricity supply after 2013.

The Government expects to release a discussion document for public consultation on this issue in June.

Transpower’s 2007/2008 Draft Policy Statement

Submissions on Transpower’s latest draft policy statement for the 12-month period beginning on 1 September 2007 closed on 14 May. The policy, updated annually, is central to the set of rules, contracts and arrangements which collectively deliver common quality and orderly system operations for the national electricity grid. The changes proposed for the 2007/2008 period include:

• more detailed description of security planning and co-ordination;

• extended discretion and flexibility in identification and management of risks; and

• defined methodology of identification, assessment and notification of risks.

The Electricity Commission supports the proposals put forward in the policy and will recommend that changes are made to the Electricity Governance Rules to achieve Transpower’s latest objectives.

A copy of Transpower's Draft Policy Statement and the proposed amendments to the Electricity Governance Rules can be viewed on the Electricity Commission’s website.

Revised Draft Regulations for Connection of Distributed Generation

In August 2006 the Government issued a discussion paper on draft regulations that specify a process under which generators may apply to distributors for approval to connect distributed generation. A second discussion paper was released in April 2007 on the revised regulations with submissions on this paper closing on 4 May.

Some of the key changes made to the draft regulations in response to feedback from the 2006 consultation include:

• an increase in the size limit (now up to 10 kW) for smaller scale generation units in response to submissions that the rating of a generator large enough to supply a large household or small family farm could be of that size; and

• changes to streamline the application process. For generation up to 10kW only one application is required and for generation over 10kW, there is a two-stage process of initial and final application;

It is intended that the final regulations will be in place by mid-2007.

The discussion paper can be accessed on the Ministry of Economic Development’s website at www.med.govt.nz.

Proposal for mandatory routine testing of “grid connected assets”

The Electricity Commission is seeking to amend Rule 8.2 of the Electricity Governance Rules to ensure that all asset owners have a legal obligation to comply with the Test Plan agreed by Transpower and the Commission for the routine testing of “grid connected assets”. The Commission considers that the Test Plan obligations on asset owners can significantly affect Transpower’s ability to meet its performance obligations. However the Commission has received legal advice that Rule 8.2 as drafted does not allow compliance with the Test Plan to be legally enforced.

The Commission issued a consultation paper on this issue in March requesting submissions on its proposal to modify Rule 8.2 and on the proposed new rules. Submissions closed on April 24.

A copy of the Commission’s consultation paper is available on its website.

If you would like to know more about an item noted above, please contact any of our electricity law team or in the first instance please call:

Andrew Brown
Partner

Garry Downs
Partner

Chris Gordon
Partner

Enquiries and information

For more information on any of the cases, articles and features in Commercial Quarterly, please email Diane Graham or call her on 64 9 916 8849.