Regulation Model “Cheaper, Simpler, Fairer”

Wednesday 29 May 2002

Powerco’s Regulation Model “Cheaper, Simpler, Fairer”

Electricity lines company Powerco today outlined a proposal for an electricity sector regulation model which would be cheaper, fairer and simpler for consumers, the industry and the taxpayer.

The model has been developed in response to the Commerce Commission’s recent discussion paper on regulation for electricity lines businesses, and is detailed in Powerco’s submission to the Commission this week. The model proposes that regulation, and company behaviour, be driven by consumer preferences rather than rigid and intrusive regulatory controls as have been applied unsuccessfully to electricity industries overseas. The Powerco model will require increased consultation and discussions with consumers on the concepts of price, service, reliability and network investments.

Powerco Chief Executive Steven Boulton said Powerco’s vision was for even-handed regulation, which ensured companies delivered electricity to a quality that met consumer preferences, at a price they were willing to pay.

“The beauty of our model is that it is self-sustaining and industry-resourced. The model requires electricity lines businesses to make price / service trade-offs, based on their consumers’ preferences. The model will also require a form of national and international benchmarking with information shared with consumers so that company performance can be compared.

“This model arms consumers with more up-to-date information and a better negotiating position than is currently available.

“Our approach puts the Commerce Commission in a judicial role where they focus on the outputs of electricity companies and use ‘declaration of control’ only as an absolute last-resort, when triggered by failure of company management to meet consumers’ needs.

Mr Boulton said Powerco was convinced New Zealand electricity consumers would not benefit from heavy-handed regulation.

“An intrusive regulatory programme will lead to a deterioration of end-consumer value in the longer term. It is critical that regulatory intervention is only targeted at the root causes of problems and not their symptoms. As it stands now, New Zealand’s delivered electricity prices are amongst the lowest in the world.

“We fundamentally believe that it is not meaningful to focus regulatory efforts solely on the lines part of the sector, but rather balance regulatory approaches across the whole industry sector,” said Mr Boulton. This approach ensures that consumers know more about the entire electricity sector rather and the value they are receiving, and can make informed choices accordingly.

Powerco believes that the market for electricity distribution services cannot be meaningfully separated from the market for delivered electricity, in terms of fairness and transparency of performance and price for the consumer. The Powerco submission also demonstrates how sector-wide regulatory principles meet the Commission’s objectives.

“The regulatory principles applying to products and services in this market must be holistic for the entire electricity supply chain if the Commission is to be effective in promoting the efficient operation of those markets,” Mr Boulton said.

A copy of the submission can be viewed on the Powerco website www.powerco.co.nz, or obtained by emailing info@powerco.co.nz

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