9 Dec 2009

Major changes likely for electricity system

9:45 pm on 9 December 2009

The Government is proposing big changes to the electricity system, with legislation to be introduced to Parliament on Thursday.

These will include paying compensation to customers who are forced to reduce electricity usage during shortages.

The Electricity Commission would also be abolished and its responsibilities transferred to new bodies and to the Commerce Commission.

Big State-owned generating companies will also have their assets reallocated.

Two of Meridian Energy's stations, Tekapo A and B, will be transferred to Genesis Energy.

And the Government-owned emergency generator plant at Whirinaki in Hawke's Bay will be transferred to Meridian Energy.

The big companies will also be required to sell electricity to each other.

The changes follow recommendations in a wide-ranging Ministerial Review issued in August, most of which have been adopted by the Government.

It will introduce legislation to Parliament on Thursday to effect the changes.

Move will slow rises - Minister

Energy Minister Gerry Brownlee told Checkpoint he is confident the changes will prevent electricity prices increasing as quickly as they have in the past.

Mr Brownlee says competition will be improved through customers being able to switch suppliers quickly and easily.

He says a trend away from soaring power prices has already begun, with some retailers offering deals to fix rates over several years.

But Mr Brownlee would not say how much the rate of price rises would be constrained by.

Major users supportive

Ralph Matthes of the Major Electricity Users Group, whose industrial members use almost 30% of New Zealand's electricity, says overall it's a very good package.

He says it will increase competition.

"At the moment the market is relatively thin, so that when large users go to market to seek offers, often there can only be one generator whose prepared to make an offer."

The Northern Employers and Manufacturers Asssociation says businesses should be better off.

Labour dismissive

The Labour Party has dismissed the reforms as a reshuffling of bureaucracy and assets.

Leader Phil Goff says the changes won't help New Zealanders with frozen wages cope with increasing power bills.

Mr Goff says what would help reduce power bills is for the Government to stop getting dividends worth $300 million from power companies and demanding more.