The Electricity Networks Association fully supports an international call for a review of the low fixed charge regulations.

“The regulations are a barrier to the introduction of new and innovative pricing methods which give consumers more choice on how they pay for a connection to a reliable electricity network,” Graeme Peters, ENA’s chief executive said. 

Peters was commenting on an International Energy Agency report.   

The ENA has asked repeatedly for the government to remove or, at the very least, review the low fixed charge regulations.

“Hopefully the IEA report will result in the government announcing a review of the low-fixed charge regulations as soon as possible.”

Peters said the IEA report was a thorough and well-researched contribution on New Zealand energy in its broadest sense.

“The IEA has identified that artificially low fixed charges result in customers paying high tariffs for their electricity consumption through volumetric charges. The IEA report is correct when it says that undue reliance on volumetric network charges has the potential to distort efficient investment, operation, and use “at the expense of consumers”.

The ENA fully supports the IEA’s view that network tariffs should provide signals and incentives for efficient, timely and innovative investment. “We agree that regulation should identify and remove any undue barriers to the introduction of cost-reflective, real-time network pricing – especially the damaging and distorting low user fixed charge regulations.”

The IEA is also supportive of wider distribution pricing reform, and so is the ENA. Members are working collectively on ways to better match lines prices with the cost of supply. For a summary of recent and significant activity, see  http://ena.org.nz/new-pricing-options/

 Regarding the IEA’s comments about the distribution sector’s productivity, flexibility and capacity, the ENA would make the following points:

  • The sector has proactively initiated consideration of pricing reform to achieve greater efficiency and cost-reflectivity.
  • The sector has advocated against low fixed charge regulations, as an impediment to more cost-reflective pricing.
  • The sector, through its membership association, the Electricity Networks Association, has an active, coordinated and comprehensive programme of work to achieve improvements in health and safety, service levels and quality, innovative technology, regulatory affairs and pricing.

 The ENA notes that the IEA report comments on the number of New Zealand lines companies – 29. The ENA would note that this is less than half the number of NZ lines companies in the early 1990s. And it is considerably less than in the IEA case study on Sweden, which has 170 distribution operators.

Nearly all New Zealand’s 29 lines companies are owned by community or consumer trusts, or by local government. Because of this ownership model, lines companies are closely linked and in touch with their communities and consumers.  As such, consumers – through their elected representatives  – are well placed to make their own appropriate choices and decisions on what is best for their communities in regard to future ownership of critical electricity infrastructure.

One of the advantages of the structure of New Zealand’s electricity distribution sector is the innovation benefits from a diversity of thought, views, and approaches to similar or common issues. This encourages fresh thinking and solutions which become shared learnings among the wider industry. And, as the IEA notes in its report, there is little  evidence that small firms are less innovative or perform less well than large ones.

ENA also notes that there are significant synergies between these companies through management agreements, shared services, and contracting.  For example, two operating companies are responsible for the management of five of the 29 lines businesses. Further, some networks are responsible for other networks’ maintenance, fault response, and capital works through contracting agreements, both in New Zealand and overseas.  

ENA members also facilitate efficiencies through their industry association. Members pool their resources to work collectively on areas as diverse as regulation, public safety, distribution pricing, health and safety, environmental planning, vegetation management, and consumer engagement. Another important and growing area of cooperation is consideration of the future requirements of electricity distribution network customers in the context of the adoption of ‘smart’ technologies.