Power industry self-regulation 'beneficial'

By CHRIS DANIELS, energy writer

Competition regulators have revealed why they think a power industry self-governance scheme will be better than a Government-imposed one.

The Commerce Commission says that the industry's Electricity Governance Board (EGB) plan would, subject to conditions, be of greater benefit than a Government-appointed administrator.

If adopted, the EGB "rulebook" will replace existing industry arrangements for the wholesale electricity market, national grid security, metering and reconciling power used by the different companies.

Concerns have been expressed throughout the EGB's development that it will be dominated by the big four electricity generator-retailers: Genesis, Meridian, Contact and Mighty River Power. The combined strength of these companies could stifle development of new rules to promote competition and protect consumers.

But the commission said it was likely the new arrangements would "give rise to public benefits from higher-quality decision-making, lower lobbying costs, and the avoidance of over-investment in transmission".

The commission has to be satisfied that the public benefits outweigh the anti-competitive aspects of any such industry arrangement.

It acknowledged that rules improving competition might be blocked or delayed and the potential for under-investment in transmission. But the risks were "significantly lessened" by conditions imposed, such as ensuring that rule changes could not be delayed unduly.

The commission has also imposed a condition allowing the whole EGB to override an industry vote opposing a pro-competitive rule change.

Commerce Commission authorisation will expire four years from when it is implemented, or by March 31, 2007, whichever comes first.

Transpower, the state-owned enterprise that owns and manages the national electricity grid, opposes the industry-governance arrangements. In its annual report published this week, chairman Sir Colin Maiden said Transpower had serious concerns with the proposed board.

"Statutory regulation is desirable to deal with multilateral issues such as transmission pricing and common quality standards - issues that a voluntary arrangement will almost certainly not be able to ensure agreement on."

There was also a need for an agency authorised to act in the public interest, said Maiden.