Media Release
November 10th 2004
LOWER PRICES PUTS ENERGY SECURITY AT RISK
Energy sector regulation focused on short term gains to consumers at the expense of improving the network leads to power
outages, says a visiting energy economist.
Margaret Beardow is visiting from Australia at the invitation of the Electricity Networks Association (ENA). The ENA
represents the interests of the 24 organisations that distribute electricity to consumers throughout New Zealand.
Mrs Beardow said "widespread power outages in many countries including the UK, the US, and Australia are making
governments rethink their approach to regulating energy networks. New Zealand has the opportunity to benefit from their
mistakes.
"Countries are realising that if their energy regulatory frameworks focus on lower prices and not on longer term
sustainability of supply, they place infrastructure at risk."
As the energy sector is so critical to a country's growth, regulation decisions must give equal consideration to long
term stability and investment, Mrs Beardow said.
New Zealand regulators had the opportunity to heed the hard lessons of other countries and ensure that the regulation
implemented here put it at the front, not the rear, of regulatory practice.
"With this in mind, the Ministry for Economic Development's decision to review the Commerce Commission's decision over
gas regulation should be welcomed by the industry."
Mrs Beardow said in Australia, past decisions of regulators were now regarded as overly aggressive. When outages did
occur it was the industry and its management, and not the regulators that forced the cost reductions, that took the
blame.
The Australian Productivity Commission released a report on gas regulation this year that found its current Gas Access
Regime could distort investment through cost-based price regulation and high monitoring costs which were of no benefit
to the economy.
"It would be a shame if New Zealand followed down the same path as Australia only to realise that it would end up
costing the public dearly."
Mrs Beardow is addressing the ENA on Wednesday November 10th.
Ends