Review takes aim at power price hikes

Gerry Brownlee. Photo / Supplied

A ministerial review into the electricity sector is aimed partly at tackling what Energy Minister Gerry Brownlee describes as power price rises that are "out of control".

The scope of the study was unveiled yesterday as a wave of power price increases are hitting consumers.

The review will cover security of supply, affordability and the duplication of sector governance with a focus on the Electricity Commission.

Mr Brownlee said the best way to tie together the various reviews was through a ministerial technical advisory group.

Mr Brownlee said power prices have risen by 72 per cent in the first eight years of this decade.

State owned enterprise power generators, all with retail arms, had been big contributors to the increases.

"We've got to find out is it a free-for-all or are there reasons for (SOE) prices being out of control?"

A radical shakeup of the market and a return to a more centrally controlled approach was unlikely.

Analysis by energy consultant Bryan Leyland found average spot prices had increased by an average of 8 per cent each year for the past three years.

Mr Leyland said generators maximised their income by keeping the system on the edge of a shortage, contributing to four tight winters in the past eight years.

"It is not the generators who are to blame, it is those who designed the electricity market and ignored warnings from people who understood power systems."

Labour's energy spokesman Charles Chauvel said the review appeared to be back to front with no clear goals set at the outset, including commitment to renewable generation.

Mr Brownlee said the first phase of the review would look at regulatory and governance issues, while the second phase will address issues of electricity market performance.

A discussion paper will be prepared by June and public consultation on the discussion paper will be held in July. Legislation would be prepared by the end of the year

Mr Brownlee said the review would take the current market design as a starting point and focus on improvements.

"The assumption is that there is still room for improvement within the current market approach rather than a more centrally controlled approach."

* The review will take account of:

The Electricity Commission's review of the dry winter last year

The Commerce Commission's investigation into electricity market competition - due out soon

The Electricity Commission's review of electricity market design

A Business NZ report on electricity sector governance.

The minister's technical advisory group will comprise of Brent Layton, David Russell, Lewis Evans, Stephen Franks, Toby Stevenson and Miriam Dean.