Commerce Commission Must Obey Law And Promote Energy Efficiency

The Commerce Commission must obey the Commerce Act and start promoting incentives for energy efficiency, an energy efficiency expert says.

“The Commerce Act clearly states that the Commerce Commission must promote incentives for energy efficiency. But despite the clear direction in government legislation, the Commission does nothing to encourage energy efficiency,” said Chris Mardon, managing director of Christchurch energy efficiency company Ecobulb.

“According to the Commission’s own documents, ‘Under section 54Q of the Commerce Act, the Commission must promote incentives, and avoid imposing disincentives for electricity lines suppliers to invest in energy efficiency, demand-side management, and reduction in energy losses.*’ This is a direct quote from the Commission’s May 30 draft decision on future regulation of lines companies.”

In a submission on the draft decision, Ecobulb says the commission must obey the law and promote energy efficiency. While the Commission suggests that its draft decision will promote energy efficiency, there is no sign of any real change in approach.

“While the Commission talks about a desire to promote energy efficiency, there is nothing in the draft decision that will incentivise or obligate electricity lines companies to promote efficiency. In other words, nothing will change - energy efficiency will continue to be disincentivised in the new default price quality path applying from 2025.

“The Commission doesn’t allow lines companies to recover any money spent in the short term on energy efficiency. Similarly, it doesn’t allow lines companies to include energy efficiency in regulated asset bases and therefore recover spending over the long term.”

“The double whammy means it is not economic for lines companies to help their customers invest in energy efficiency, so they understandably don’t. This fact is starkly obvious in the information which lines companies provide to the commission each year. Spending on energy efficiency is close to zero, proving there are no incentives to encourage efficiency.”

Electricity distribution businesses should be obligated and incentivised to invest in energy efficiency activities which benefit their residential and commercial customers. This has become even more important following the cancellation of the vast majority of the Government’s funding for residential and commercial energy efficiency.

“While the Commission’s draft decision allows a 50 percent uplift in network revenues, it should also encourage networks to spend on energy efficiency projects, as these provide greater reductions overall in consumer bills. Energy efficiency also lowers peak loads, energy volumes, and carbon emissions.”

Ecobulb’s submission strongly recommends that the Commission allocate half of its proposed Innovation and Non-Traditional Solutions Fund to energy efficiency, increase the size of the fund to five percent of revenues, and simplify and clarify rules around what qualifies as spending on energy efficiency.

*Default-price-quality-paths-for-electricity-distribution-businesses-from-1-April-2025-Draft-reasons-paper-29-May 2024.pdf (comcom.govt.nz), p61.

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