Power Company Head's Comments Staggering -- Bradford

  • Max Bradford

Energy Minister Max Bradford says he is staggered by the comments of Power New Zealand chairman Jim Macaulay regarding the Government's electricity reforms.

Mr Bradford was responding to an attack by Mr Macaulay, at Power New Zealand's annual meeting yesterday, that the Electricity Industry Reform Act was "ill-conceived" and "flawed".

"Such comment from the chairman of two of New Zealand's largest power companies (Power New Zealand and Mercury Energy) is, to say the least, poignant," Mr Bradford said.

"The ink has hardly dried on the independent report into the central Auckland power failure, which found major fault with the way one of the two companies he heads planned and managed its operations and assets. The Committee of the Inquiry was damming of the company's stewardship, and that focus on its lines businesses was lost.

"Under the Government's electricity reforms power companies must split into separately owned lines and energy trading/generation businesses. This will mean lines companies will be focused on their business of providing the wires and poles, and the security of their lines - something Mercury seemed to lose sight of."

Mr Bradford said the Government had been consulting power companies on the direction of its reforms for many, many months prior to the changes being announced.

"Power companies had ample time to make their views known," Mr Bradford said. "Once decisions had been made, it was important the Government moved quickly to ensure certainty for the industry.

"It is also important to note that power companies belatedly became proponents of a corporate, as opposed to an ownership split. Advice the Government has received clearly shows an ownership split is the best option to achieve real competition in the industry - and to focus companies on their core business."

Mr Bradford said it was also interesting to see Mr Macaulay praising the Government's further split of ECNZ.

"When working on the reforms, the power companies told us ECNZ was the reason we have high electricity prices - ECNZ told us the problem was the power companies. Both were right - and both the wholesale and retail ends of the market are being reformed.
"The Electricity Industry Reform Act will give consumers, particularly householders and small businesses, a better deal. It will give them real choice, and through this greater competition, lower prices.

"Even ECNZ is now 100 per cent behind the reforms, and agrees that prices will come down. Their chief executive Dave Frow has recently said in an open letter that the reforms 'should mean lower prices of the order of five to 10 per cent to domestic consumers within the next two years'.

"I think Mr Frow is being quite conservative in his forecasts, but his essential point is prices will come down."

Mr Bradford said overseas commentators were also supporting New Zealand's electricity reforms. For example, the NUS International Electricity Price Survey supports the splitting of ECNZ and ownership separation of line and energy trading companies, stating separation "constitutes the removal of the last hurdle to true competition taking place".