Contact on Govt Electricity Policy Announcement

Contact Energy On Government Electricity Policy Announcements

Policy announcements aimed at improving security of supply during dry years received a cautious welcome from Contact Energy Ltd today.

“We welcome the fact that the Government has moved to address a period of uncertainty for the industry, particularly for those such as Contact with investment plans to improve dry year reserve,” said Contact’s managing director, Steve Barrett.

“We are digesting the implications of today’s announcements and there are significant elements of technical detail still to be formalised. For example, the details of how the proposed security mechanism will be implemented will be critical to its success.

“Likewise, the new Electricity Commission will hold powers in reserve to require generators to offer long-term contracts up to a nominated proportion of their reliable capacity, and/or compel retailers and large users to purchase long-term contracts.

“It is very important to understand the checks and balances associated with the use of such powers, as they have the potential to significantly affect the incentives on generators and customers to voluntarily sign long-term contracts, which can underpin investment in new baseload power stations.

“That said, today’s announcements appear to strike a reasonable balance between the need to maintain a competitive electricity sector while dealing with the particular circumstances that New Zealand currently faces.”

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