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An online electricity retailer says the government's reforms of the electricity industry may not achieve the aims of bringing down prices and stimulating competition.
The government on Wednesday announced the biggest shake up the electricity industry has seen since the Bradford reforms of the 1990s.
Among the reforms, generators will made to swap some key assets, retailers will be made to compensate consumers if there are power savings campaigns, and a mandatory hedging market will be established.
Ari Sargent, chief executive of Powershop.co.nz, says the reforms look sensible at first glance. However, he says they lack the sort of detailed analysis he would expect for such major changes.
"The Cabinet regulatory impact statement itself...flagged that there wasn't sufficient, comprehensive risk analysis of the likely outcomes.
"We have very grave concerns that some of those unanticipated outcomes will do the exact opposite of what the reforms intend to do," he says.
One of those concerns is the government's intention to shift assets between rival state-owned electricity companies. Among those plans, Meridian Energy will be told to hand over Tekapo A and B power stations of the Waitaki system in the South Island to Genesis Energy.
Sargent says the Waitaki system is a critical catchment for security of supply, but handing the upstream operation to Genesis risks losing the integration needed to manage the resource.
While only 14-15% of the Waitaki generation comes from the Tekapo station, approximately 40% of the controllable inflows into the Pukaki come from Tekapo. This means that Genesis will have control of 40% of Meridian's controllable inflows.
'It's bad enough that you lose co-ordination in terms of security of supply, but giving control to a competitor with commercial incentives to essentially screw the scrum for commercial gain is bordering on reckless," says Sargent.
Following the government's announcement, Meridian suspended the issue and renewal of its renewable energy notes.
Sargent believes the whole reform policy is designed for the status quo. He says moves to make retailers liable for compensating customers during energy saving campaigns are a good initiative, but the government has lumped everyone in together.
"They've made no distinction between vertically integrated generator-retailers and stand-alone retailers, so what they've done is introduce new barriers to entry to innovative retailers," he says.
Meanwhile, Business NZ has welcomed the government's changes, describing them as a major step forward, particularly in areas such as security of supply.
"We want to see a framework where generators and retailers compete vigorously and have incentives to properly manage their dry-year risk,' he says.
O'Reilly says he will be pleased to see the reserve energy scheme go, saying it has hindered rather than helped achieve security.
"Abolishing the reserve energy scheme, addressing the absence of regional competition, getting more transparent pricing and compensating customers for conserving energy are steps towards a more effective and efficient system," he says.
However, while the reforms appear to be a step in the right direction, O'Reilly says the organisation is looking forward to seeing more details.
What do you think about the changes? Have your say on the messageboard below.
Add a Comment:
Post new commentte retard said on 2009-12-10 @ 00:46 NZDT: Report abusive post
Forget about the hope of Brownleee energy reform bringing you cheaper electricity prices. This WILL NEVER happen. Previous Nat govt promised the same thing when they deregulated the electricity market. The sad truth is that there is no competition in the electricity generation supply market. In a dry year, they all push up prices so no matter which supplier you turn to, you will get hit just the same.
Straight Shooter said on 2009-12-10 @ 00:23 NZDT: Report abusive post
Part of the answer to that question is the same reason why dairy products are also expensive - the products fetch a higher price the further away the market. The other reason for the high price is that the New Zealand electricity industry has 3 parts - North Island hydro, South Island hydro and North Island thermal. Each of these 3 areas of generation used to cover eachother during seasonal flows. By splitting ECNZ into 3 the risk increases prices and there is less incentive for new generatio
ErikBlood@xe said on 2009-12-09 @ 22:24 NZDT: Report abusive post
Sorry to shout, but the HUGE mistake the powers that be are making is cloaked as the benign sounding 'PM10' bill. Wee particles produced by wood burners are being blamed. What about diesel vehicles? As a result heat pumps which rely on old carbon fossil fuels are being promoted rather than the good old chippy. Short cycle carbon is renewable and sustainable. NZ is desperately short of power already. Easier and better to plant more trees than dig coal. Wrong policy, lets fight it!!
Arty said on 2009-12-09 @ 19:36 NZDT: Report abusive post
the further electricity is transmited,the greater the loss and the higher the cost . Why should I pay as much for my electricity as someone in Auckland when I live almost in the shadow of one hydro station and two geo thermal plants Cheaper power@source will see gravitation of bussiness and people to genration source and eliminate need for expensive pylons across Waikato farmland