Opening of the Taranaki Combined Cycle Power Station at Stratford

  • John Luxton
Food, Fibre, Biosecurity and Border Control

Thank you Mike. Good morning ladies and gentlemen.

The guests here this morning represent the tremendous range of stakeholders in this project. They include the present owners of the project - TransAlta New Zealand, Fletcher Challenge and Mercury Energy - former owners ECNZ, local iwi and other residents, contractors, project workers, landowners, and many others. I am sure you all share a sense of achievement in marking the completion of the development part of this project, and are now looking ahead to the power station ?s operational life.

Today?s opening marks the culmination of eight years of planning, negotiation, construction and testing. I congratulate you all on showing such confidence in your industry, your region, and your people.

Electricity reform
The same eight years and more have been a time of great change in the electricity industry, as this Government?s programme of microeconomic reform has featured promoting the efficiency of energy markets.

Starting from the mid-80s with the first restructuring of ECNZ and Transpower, both Labour and National Governments have pursued a reform programme that has changed the face of the electricity industry. As with all microeconomic reforms, the underlying imperative is to build an economy that is better able to compete in a global marketplace, and that gives more choice and opportunity to its participants.

Electricity is a notable input to practically all areas of the economy. We spend about $2.7 billion a year on electricity, so it was obviously an important target for reform.

An efficient electricity industry is vital for a competitive, growing economy. Our relative costs internationally are nowhere near as good as they should be.

Other countries are moving to reform their electricity and other industries in order to achieve lower prices for their consumers. So New Zealand?s competitiveness will deteriorate unless the reforms begun over a decade ago are completed.

In the short term, international pressures may severely constrain our ability to grow. But the reforms in this sector are not short-term, and the industry as a whole must keep its eye on the medium to long term. The lead-time to the commissioning of this plant is a clear illustration of that fact.

There are three key overall objectives of the Government?s energy policy:- To ensure that electricity is available to consumers when required. To ensure that electricity is produced at the lowest possible cost to the economy as a whole; and To see that harm to the environment is minimised.

We have set about achieving these objectives through the promotion of vigorous competition wherever possible, and the use of regulation where competition is not possible - notably in lines businesses.

The Government?s energy reforms have been comprehensive.

We have established a regulatory framework to promote competition in all network industries, including electricity. This approach is founded on the Commerce Act, and backed up by disclosure into the public domain of information which can point to potentially anti-competitive practices.

This framework has been known as ?light-handed? regulation, and the term still applies unequivocally to the regulatory frameworks for the gas, telecommunications and postal industries. In electricity, however, we have had to make more of an intervention to pursue our policy objectives.

The reforms have tackled all the key issues, from the removal of statutory supply franchises, the elimination of Electric Power Boards and promoting the establishment of a wholesale electricity market, to the mandatory ownership separation of distributors. But it is the reform of the generation sector that is of greatest interest to those of us here today.

Electricity generation is one of the sectors where competition is possible and desirable. It also happens to be one of the sectors where the Government, for historical reasons, has a dominant ownership role (the other sector being transmission).

ECNZ has been separated from its parent government department, and then from Transpower. It was corporatised as long ago as 1987, and split in two in 1996, when Contact Energy took over about 25% of ECNZ?s assets. And now, ECNZ is in the process of being split again - this time, into three competing state-owned generators that should be up and running on 1 April next year.

ECNZ still supplies about 70% of the wholesale market, and much of the rest is provided by Contact Energy. Independent Power Producers still supply very little of our electricity needs.

The forthcoming split of ECNZ will mean there are more similarly-sized generators competing to sell into the wholesale market, and to invest in any necessary additional capacity.

These steps have been taken in the expectation that wholesale electricity prices can come down. The reforms to distribution can be seen as facilitating the passing on of those wholesale price reductions, so that all consumers will benefit.

Resource Management Act
Before concluding, I should mention the application by then-owner ECNZ for an air discharge permit for this power station, under the Resource Management Act.

In 1994, the Minister for the Environment exercised for the first time his right to ?call-in? an application. The resulting Board of Enquiry considered both the local and global effects of the discharge. It found that mitigation of the emissions from the plant by way of the creation of ?carbon sinks? - that is, what most of us call ?forests? - was required.

The Government appreciates the co-operation shown in complying with this new requirement.

Taranaki Combined Cycle Plant
At the end of the day, we have here the most efficient commissioned gas-fired power station in the country, with a thermal efficiency of 58%.

These are times of change in the electricity industry.

Times of change bring opportunities.

Government moves to split ECNZ will create more commercial opportunities for IPPs like the Taranaki Combined Cycle Plant. This obviously challenges your ability to produce electricity at a competitive price.

I wish the partners in this venture every success, and hereby declare the Taranaki Combined Cycle Power Station open. Thank you.