Secretariat: What have been the Commission's key initiatives and achievements under your leadership?
Chairman:
I have been Chair of the Electricity Commission (Commission) since October 2007 and in that short time the Commission has had to deal with a diverse range of complex issues. It is pleasing that these matters have been successfully resolved. The non-exhaustive list of issues the Commission has dealt with includes:
- Managing low hydro inflows (dry year risk) this past winter without the need for significant interventions. The electricity system’s recent performance has confirmed my confidence in the level of reliability inherent in the system
- Approving significant investment proposals by the monopoly national transmission provider (Transpower New Zealand Limited)
- High Voltage Direct Current Upgrade ($NZ780m) (the transmission link between New Zealand’s two main islands)
- West Coast (of the South Island) transmission Upgrade.
- Publishing a new Statement of Opportunities (2008 SOO) which sets out a set of possible futures for electricity supply and demand, and is intended to signal opportunities for investment in transmission upgrades and transmission alternatives. The 2008 SOO contains key information to enable the identification of potential opportunities for efficient management of the grid, including investment in transmission upgrades and transmission alternatives
- Successfully completing the transmission pricing and wholesale meter reconciliation projects.
Secretariat: What do you consider are the Commission’s key strengths as a regulatory organisation?
Chairman:
The Commission is a small yet multi-functional entity. It has a strong esprit de corps, and a highly professional work ethic. The New Zealand model for this specialist regulator is slightly different from other regulators in that it has a very strong technical focus, using a greater proportion of external legal/economic advice than other regulators who tend to have a greater proportion of internal legal/economic expertise.
I like to describe the Commission as an organisation that does a lot of different things well, in a "let's get quietly on with it" manner. We take very seriously our legislative requirement to seek voluntary solutions before imposing new rules and regulations on market participants.
Secretariat: In which areas, in your opinion, can the regulatory community in East Asia & Pacific region benefit from the experiences, Orders, and Regulations of the Commission?
Chairman:
In my view New Zealand's past experience with industry self-regulation is still instructive, both for why it failed and for the extent to which a private, contractual approach might still be considered as a useful counter-factual to some regulatory challenges.
New Zealand has also tackled some of the more intractable issues around striking a reasonable balance between the interests of the monopoly provider of transmission and the interests of users of transmission services. The Commission consultation and decision making processes delivered a default contract for transmission services and fair and efficient pricing of those transmission services.
New Zealand has also further developed and refined the grid investment test (GIT) applied in approving transmission investments. The GIT was adapted from the regulatory investment test applied in Australia’s regulatory regime.
New Zealand's current challenges of how to integrate growing generation from renewable resources such as wind and geothermal may also have lessons for other jurisdictions.
Secretariat: What issues and challenges does the Commission expect to face over the next 2-3 years? How can you benefit from the experiences of the regulatory community in East Asia & Pacific region?
Chairman:
The Commission is committed to making demand-side participation a significant force in the demand/supply mix (i.e., finding ways to allow the demand side to interact usefully with the market). This is a considerable challenge from a technical, legal and behavioural point of view.
A significant ongoing challenge is finding the right balance between using regulation (intervention) to resolve issues and allowing the market to develop solutions in a small islanded system with a small number of participants.
As well as observing successful regulatory practices in the developed countries in the region, New Zealand can also benefit from observing developing countries’ regulatory approaches to new technologies. Developing economies can often bypass older technologies. These legacy technologies often provide incumbents with market power and create the need for regulation.
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