Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Electric Competition in New Zealand: Putting Last Things First

Fortnightly Magazine - June 15 1996

local line charges (i.e, the wheeling charges for distribution). Also, the rules have created a framework for separating line costs (em which are associated with a natural monopoly service (em from energy costs (em which are viewed as a competitive service. Through disclosure of financial information by function, private parties and governmental agencies can determine whether prices are competitive.

s Antitrust Oversight. The Commerce Act of 1986 forms the basic antitrust law in New

Zealand. It allows the Commerce Commission to impose price controls on any industry if it uncovers misuse of market power on the part of any private party.

This scheme for light-handed regulation imposes no explicit price controls or other regulation for either the competitive or the natural monopoly segments of the electricity industry. Thus, no formal authority exists to supervise, guide, or oversee such competition issues as the proper basis or level for interconnection fees or line charges. Instead, the simple disclosure of information by private parties (em with evaluation by government agencies and the ensuing threat of regulation (em is considered sufficient to discipline industry players.

These actions by the government and the private sector have created the conditions for

vigorous competition in many sectors of the New Zealand electricity industry. Transmission, with its natural monopoly characteristics, is the only segment of the industry where competition has been slow to develop.

Transmission Sector

Trans Power, the state-owned electric transmission company, occupies a dominant position in high-voltage, intercompany transmission. While Trans Power enjoys no explicit monopoly, bypass opportunities are limited to the margin. Even so, Trans Power has lost new investment opportunities to competitors, notably the supply to a major industrial complex at Lichfield in the central North Island. The current dispute over the valuation of Trans Power assets and the resulting

transmission charges have made bypass of keen interest to both generators and downstream customers.

Trans Power also holds responsibility for generation dispatch and all pooling and integration functions. Connection to the grid by new generators and offtake of energy from Trans Power is open to any party that meets the appropriate technical requirements.

Generation Sector

Until recently, ECNZ owned about 96 percent of all generation capacity, including all of the large thermal and hydroelectric capacity in New Zealand. Concern over ECNZ's ability to overwhelm any competitive initiatives in generation led to its breakup.

While several proposals were considered, ultimately the decision was made to split the company into two state-owned enterprises (at this time privatization is not being considered). The larger of these (em still known as ECNZ (em retains the large hydroelectric plants for several river

systems and the Huntly thermal plant, the nation's largest gas-fired power plant. The smaller (em known as Contact Energy Ltd. (em holds all the geothermal capacity, some thermal and hydro capacity, and all of the rights to purchase natural gas. Several of ECNZ's smaller hydroelectric facilities will also be sold to independent power producers or local distribution companies.

Market share for ECNZ has declined to about 67 percent. This figure is expected to decline to about 60 percent by