Crisis Will Undermine Economic Growth

Government Told To Take Electricity Industry Seriously ETNZ Warns: Crisis Will Undermine Economic Growth

Wellington (April 10, 2003) – The electricity generation and retailing sector is spiralling into a crisis that will undermine New Zealand’s economic growth and it will take a concerted energy-industry approach to avert disaster, according to the Energy Trusts of New Zealand Inc.

The complete structure of the industry needs to be reviewed to ensure there are incentives to enable investment in electricity transmission, and to guarantee much-needed generation facilities are built, according to ETNZ chair Ken Gilligan.

Mr Gilligan, who was elected chairman of ETNZ at the organisation’s annual meeting this week, said the industry has struggled with constant change for several years and this is adversely impacting on the long-term security of power supply.

“Trusts are willing to assist the industry by investing in it, but until there is a clear and cohesive approach to regulation of the industry this will not happen,” Mr Gilligan said.

The ETNZ believes lines companies can transparently separate their monopoly business from contestable operations to eliminate any cross subsidisation – therefore freeing the community-owned trusts to invest in other parts of the sector.

Lines companies could compete in both the retail and generation markets, therefore creating some real and much needed price pressure in the market.

As it stands, the energy industry framework does not encourage new capital investment for both generation and transmission, and profits are maximised by maintaining electricity in short supply.

The ETNZ believes the government needs to replace the current Electricity Governance Board which is dominated by state-owned generators and retailers, and therefore is neither independent nor incentivised to set high standards for security of supply.

The way forward is to increase competition, improve the electricity system through distributed generation and ensure the industry can manage the economy’s exposure to dry year risks.

“The evolving policy framework lacks the support of an increasing proportion of industry participants like the ETNZ and the government needs to take these issues seriously to keep the lights on,” Mr Gilligan said.

“Member trusts have investments of more than $4 billion in lines companies and we cannot stand aside during this time of potential crisis and need for essential adjustment of the industry”, he said.

About the ETNZ

The Energy Trusts of New Zealand Inc (ETNZ) is an incorporated society of energy trusts, the majority of which hold shares in companies which operate Electricity Networks (Lines Businesses). ETNZ has twenty-six member trusts. Most ETNZ member trusts hold shares in companies that acquired the assets of local community owned power companies, or Power Boards. Those shares are held on behalf of beneficiaries who are, in the main, local electricity consumers.

Over coming weeks the ETNZ will be preparing a strategy to take ETNZ into the future. Trustees take seriously their responsibilities to protect consumers’ interests, as beneficial owners of lines companies, and ETNZ is ready to assist in bringing about change for the best interests of owners and consumers.

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