THE LIGHTS WILL STAY ON!!!

The days of huge, centrally planned, taxpayer subsidised power stations are now officially over, the Minister of Energy, Hon Doug Kidd said today.

The start of the wholesale market tomorrow means that private sector investors will have their own money at risk when new power stations are built. This gives them powerful incentives to get it right, because if they don't they will lose their shirts. In the past, taxpayers just paid and paid.

Already we have seen commitments to build some 1000MW of new capacity, taking care of expected increases in demand for at least six or seven years.

Furthermore, unlike the dinosaurs of the past, these are smaller, more environmentally acceptable plants, including cogeneration, wind, gas, landfill gas, and geothermal.

Mr Kidd said another benefit New Zealanders will receive from the new market will be sustained downward pressure for the first time on costs and prices in electricity generation.

Of course, the critics will predict otherwise, and focus on short term, transitional price changes as long standing cross-subsidies are removed and the one-off costs of setting up the market are absorbed. But we have seen the benefits of competition in sector after sector, and there is no reason to doubt that we will see it in electricity too.

Already buyers have signalled their expectations of likely price trends with the high uptake of ECNZs tenders of long term contracts at prices much lower than the pundits predicted.

Mr Kidd said that the market allows for much better management of hydro shortages, as price movements in the spot and contracts trading markets provide early warning and strong incentives to manage risk effectively.

There is no way New Zealand will be caught out again by a repeat of the 1992 hydro crisis, he said.

In addition we will see the breakdown of the old take it or leave it attitude in electricity supply. Those who don't offer quality service to their customers, both at wholesale and retail level, will get taken apart by others who will.

Mr Kidd said there are strong incentives on electricity suppliers to encourage their customers to conserve electricity, therefore benefitting the environment and cutting power bills. If electricity suppliers do not use all of the electricity they have contracted to purchase they can sell it back to the market at a profit. Electricity consumers can therefore expect to be offered incentives and mechanisms to cut their consumption.

We can look forward to an exciting, innovative and dynamic electricity industry. The doom and gloom merchants with their narrow, short term focus will be proven wrong again, just as they have been in all other sectors of the economy, said Mr Kidd.

I would like to congratulate all those who have been involved in the establishment of the wholesale electricity market. When the switch is pushed tonight the lights will not go out and New Zealand will be embarking on a new era of customers focused electricity supply.