CMA: Response to Electricity Report

Canterbury Manufacturers’ Association.

13 September 2006.

Response to Electricity Report ‘Addresses Symptoms, not Causes’.

The Canterbury Manufacturers’ Association says that the response from the Government and the Electricity Commission to its report into the problems facing the country’s electricity system has been to address the symptoms and not the causes. As a result, the Association says that New Zealand public will face higher prices and lower security for power in the years’ ahead.

CEO John Walley says that the Government recognises that there are problems for New Zealand’s electricity system; however taking remedial steps such as replacing the shackle and removing any power-lines from above the Otahuhu sub-station that caused the Auckland blackout is not the basis for providing a long term, nationwide solution.

Mr. Walley says that despite Auckland’s blackout and the findings in the CMA report, “there appears to be an acceptance that a reserve margin of 9% and the incremental, just-in-time approach to generation and transmission is sufficient ensuring reliability of supply. The bolder alternative looking towards implementing the large hydro base load generation and transmission backbone that will also ensure lower prices for consumers seems as distant as ever”.

“Our research shows that with both plants at Huntly and Whirinaki on-stream and improvements made to Otahuhu, New Zealand is still heading for a shortfall in electricity supply around 2011”, says Mr. Walley. “So even if the Electricity Commission and those discussing the National Energy Strategy can determine when there are going to be dry years, the Government is prepared to leave decisions on keeping the lights on to the market. This way it avoids the responsibility for making some important and expensive decisions. Our message to consumers is expect to pay more and maybe learn to see in the dark”.

Mr. Walley says that when the Government refers to the ‘market’ as it currently stands, it is referring to the Vickory Auction system which operates in a manner that is vulnerable to gaming, allows the generating companies to achieve the maximum price for providing electricity and does not support the consumer or maintain the reserve margin.

“The CMA appreciates the response that it has received following the release of the report, including that from the Government and the Electricity Commission”, says Mr. Walley, “and we accept that large hydro base load generation and an efficient nationwide transmission system will be expensive to build in the short term”.

“However, the Government and the Electricity Commission’s unwillingness to consider a strategy that utilises this country’s renewable resources and tackle the uncertainty stemming from the climate change policies and the RMA have resulted with the New Zealand public being told to expect higher prices for electricity in the future”.

Mr. Walley says that New Zealand needs to make a decision as to the future direction of its electricity system because unfortunately, time is running out. “In the best case scenario demand will outstrip supply sometime in the next three or four years and it will take the best part of a decade to fix the problem – we are already late.

With a real effort the situation is retrievable now; the longer we wait the more painful the solutions will be. Bold, firm, long term decisions need to be made that inevitably will not please everyone but the benefits to New Zealand are worth it if it means that consumers will pay less for their power and the lights stay on”.

ENDS

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