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Digest No. 1783

Electricity Industry Bill 2009 (2010 No 111-2)

Date of Introduction: 10 December 2009
Portfolio: Energy
Select Committee: Finance and Expenditure
Date report presented: 09 June 2010
Published: 20 July 2010byJohn McSoriley BA LL.B, Barrister,Legislative AnalystP: (04) 817-9626 (Ext. 9626)F: (04) 817-1250 Caution: This Digest was prepared to assist consideration of the Bill by members of Parliament. It has no official status.Although every effort has been made to ensure accuracy, it should not be taken as a complete or authoritative guide to the Bill. Other sources should be consulted to determine the subsequent official status of the Bill.

Purpose

The aim of the Bill, as introduced, is to:

  • replace Subpart 2 of Part 14 and Part 15 of the Electricity Act 1992 and the Electricity Industry Reform Act 1998 and to make amendments to Part 4 of the Commerce Act 1986 and consequential amendments to the Gas Act 1992 and other Acts to reform the governance arrangements for the electricity industry;
  • provide for specific regulatory changes to be made;
  • change the overall structure of the sector.

"The Bill also undertakes a general tidy-up and consolidation of provisions relating to the electricity industry" [1]   .

"Specifically, the bill would disestablish the Electricity Commission and replace it with an Electricity Authority, allow lines businesses back into retailing, incorporate the provisions of the Electricity (Continuance of Supply) Amendment Bill (as reported by the Commerce Committee in 2009), and reconfigure some assets of the three State-owned generators (Meridian Energy Limited, Mighty River Power Limited, and Genesis Power Limited)" [2]   .

The Bill as introduced is described in Bills Digest No 1733.

Main changes to the Bill

Transfer Tekapo A and B: Supplementary Order Paper No 121: Shareholding ministers may change agreements, permits and give directions

The Select Committee has recommended the insertion in the Bill of provisions (with variations) of Government Supplementary Order Paper 121 (which provides asset transfer arrangements for the Tekapo A and B power stations, while minimising costs, risks, and delays in the transfer of consents from Genesis (the present owner) and while preserving existing environmental rights and obligations).

The Select Committee has recommended in particular:

  • the insertion of a description of the purpose of the asset reconfiguration provisions (varied to refer to the maintenance of environmental effects specified in the consent and the maintenance of rights and obligations of permits and agreements with third parties) (Part 5, Subpart 2, inserting New Clause 124A);
  • the insertion of a wider power for shareholding Ministers to give directions to State generators (Part 5, Subpart 2, inserting New Clause 124);
  • allowing the Minister of Energy and Resources, in consultation with the Minister for the Environment, to change the permit conditions by order if it proves impracticable for generators to meet some Waitaki Power Scheme consent conditions (Part 5, Subpart 2, inserting New Clause 124C);
  • providing for shareholding Ministers to direct Meridian and Genesis to change the conditions of the agreements between them and/or offer to third parties before a specified date any replacement agreements necessary to maintain the rights and obligations of the existing agreements, and limiting appeal rights (Part 5, Subpart 2, inserting New Clauses 124C and 124D and 124G(2)).

Limitation of liability in respect of ministerial direction

The Select Committee has recommended that the State generators and the Crown be protected from the legal consequences of ministerial directions and that actions or omissions by a State generator pursuant to a Ministerial direction be authorised under section 43 of the Commerce Act 1986 (Part 5, New Clause 124C and New Clause 128).

Comment

Section 43 of the Commerce Act 1986 (so far as relevant) provides:

(1)" Nothing in this Part of this Act applies in respect of any Act, matter, or thing that is, or is of a kind, specifically authorised by any enactment or Order in Council made under any Act.

(2) "For the purposes of subsection (1) of this section, an enactment or Order in Council does not provide specific authority for an act, matter, or thing if it provides in general terms for that act, matter, or thing, notwithstanding that the act, matter, or thing requires or may be subject to approval or authorisation by a Minister of the Crown, statutory body or a person holding any particular office, or, in the case of a rule made or an act, matter, or thing done pursuant to any enactment, approval or authorisation by Order in Council".

Monitoring and enforcement and definition of "industry participant"

The Select Committee has recommended a redrafting of the provision for the monitoring, investigative and enforcement powers of the Electricity Authority in respect of industry participants (Part 2, Subpart 4, New Clauses 47A-47D). These powers apply to industry participants which is defined in the Bill as introduced. The Select Committee has recommended that the definition be changed to include "a person, other than a generator, who generates electricity that is fed into a network" (Part 2, Subpart 1, Clause 9, amending definition of "industry participant").

Price restraint regulations

The Bill as introduced provided a mechanism by way of regulation for the imposition of restraint in respect of the charges relating to line function services to domestic premises and consumers in sparsely populated areas. The Select Committee has recommended that these provisions be deleted from the Bill and a simpler provision be placed in the relevant regulation-making clause. Regulations may be made to "regulate the rate of change in the prices charged by distributors to rural consumers on a network as compared with the rate of change in the prices charged to comparable non-rural consumers on the same network" and "regulate the rate of change in the prices charged to consumers supplied with electricity from an alternative source under [Clause] 107" (Part 4, deletion of Subpart 4, Clauses 111-115; Part 5, Subpart 1, amending Clause 120(2) by inserting new paragraph (e)).

Comment

Clause 107 relates to a distributor's obligation to supply electricity to places. The price restraint powers do not now apply to "domestic premises". The select Committee stated in its commentary on the Bill: "We believe that these provisions should be narrowed because, although the ability to regulate domestic line charges is now redundant as a result of the price control provisions in Part 4 of the Commerce Act 1986, some powers are still needed to reinforce the policy intention of avoiding disparities between rural and non-rural line charges".

State-owned enterprise asset reconfiguration

The Select Committee has recommended the insertion of detailed provisions enabling the giving and implementation of Ministerial directions to accomplish State-owned enterprise asset configuration (Part 5, Subpart 2, Clauses 123-125).

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  1. Electricity Industry Bill, 2009 No 111-1, Explanatory note, General policy statement, Overview, p. 1.   [back]
  2. Electricity Industry Bill, 2009 No 111-2, As reported from the Finance and Expenditure Commentary, p. 1.   [back]