NZ ENERGY SECTOR REFORMS AT INTERNATIONAL FOREFRONT

  • Max Bradford
Energy

New Zealand is at the international forefront of energy market reform because it moved down the road of comprehensive reform early, and embraced the deregulation process more fully than many other developed nations, Energy Minister Max Bradford said today.

The Paris-based International Energy Agency - a body set up under the framework of the OECD - today released an in-depth review of New Zealand's energy sector. "The IEA report is a valuable opportunity for the Government, the energy sector and commentators to obtain an outside, unbiased assessment of our policies," Mr Bradford said.

The report endorses New Zealand's energy sector reforms, and concludes that they have led to increased efficiency, lower costs, and enhanced consumer choice and service.

"The IEA has put New Zealand's energy sector under a microscope and found we have made impressive progress to the extent that our market oriented policies could serve as a model for regulatory reform in other IEA countries," Mr Bradford said.

"However, being at the forefront has its challenges as well as rewards, particularly in the thorny areas of climate change and barriers to competition which persist in parts of the energy sector." The report raises concerns that in some areas - electricity generation in particular - reform may have not gone far enough to ensure effective competition. It suggests that a further break-up of ECNZ would be desirable to encourage greater competition in generation, and going further, recommends that electricity generation should be fully privatised.

Mr Bradford notes that privatisation is off the Coalition Government's agenda, and adds: ``The recent upsurge in new generation investment shows that private sector investors are confident they can compete with the two state-owned generators." The report also questions whether New Zealand's ``light-handed'' regulatory regime is adequate to prevent monopoly abuse in energy distribution and retailing.

Rather than establish costly industry-specific energy market watchdogs, New Zealand relies on the Commerce Act and for the electricity and gas industries rigorous information disclosure regulations (to be promulgated shortly for gas) to guard against anti-competitive behaviour.

``I am aware of some weaknesses with the electricity information disclosure regulations. The Ministry of Commerce has developed proposals to deal with these by tightening the regulations to get greater transparency with respect to business costs," Mr Bradford said.

The IEA team raised concern over the strength of competition in the New Zealand wholesale and retail petrol markets.

"These are also matters of concern to the Government and steps are being taken to address this issue. The IEA and New Zealand public need be in no doubt that one of my targets as Energy Minister is to get enhanced competition in this market.," Mr Bradford said.

``Another important issue this report raises is climate change - in particular the concern that any unilateral actions by New Zealand to impose a carbon charge will harm the New Zealand economy and have limited impact on global emissions because energy intensive industries will move offshore to places that are less strict about greenhouse gas emissions." The Government recognised this point, and partly for this reason has decided to postpone consideration of whether to introduce a carbon charge until the current international negotiations on climate change conclude later this year, Mr Bradford said.

"We expect key decisions reflecting international resolve and direction to emerge from those negotiations," Mr Bradford said.

The IEA report is to be released at a video press conference with IEA director Robert Priddle (video link from Paris) and Energy Minister Max Bradford, 10am May 12, at the Wellington Regional Resource Centre, Open Polytech of NZ, 152 The Terrace, Wellington.