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Options paper released for reforms in the electricity industry

February 21, 2019

Contacts

Partners Anne Callinan, James Craig, Michael Sage, Simon Vannini
Special Counsel Chris Browne

Earlier in February we published an FYI about regulatory changes for electricity distributors coming in 2019.

Yesterday the Expert Advisory Panel for the Electricity Price Review released an Options Paper for reforms in the electricity industry. Some of the options in the Paper relate to the matters we covered in our previous FYI.

Distribution and transmission pricing

  • The Panel supports new Government Policy Statements on both distribution and transmission pricing (Options E1 and E2). The Policy Statements would guide the Electricity Authority in its policy development for distribution and transmission pricing and implementation of that policy through the Electricity Industry Participation Code.

    The Paper presents the further option of changing the Electricity Industry Act to require the Electricity Authority to “give effect to” Government Policy Statements, which would be a step up from the Authority’s current obligation to “have regard” to them. The Panel is undecided on this reform.

  • The Paper presents the option of introducing regulated (binding) pricing principles for distributors, including as to the allocation of distribution costs between households and businesses (Option E3). The Panel says shifting some distribution costs from households to businesses “could perhaps be fairer” than the current balance. The Panel is undecided on this reform.

  • The Paper presents the option of new regulations to limit price shocks for consumers arising from distribution price increases (Option E4). The Panel says the regulations could be modelled on regulations applying in Australia, which give the Australian Energy Regulator an oversight role. The Panel is undecided on this reform.

  • The Panel supports a measured phasing out of the Low Fixed Tariff Regulations (Option E5).

Default distribution agreement

  • The Panel supports a default distribution agreement, including for embedded networks (Option C4). The Panel also supports changing the Electricity Industry Act if the final Court of Appeal decision in the Vector case is that the Electricity Authority is not empowered to regulate this matter.

  • The Panel supports strengthening the Electricity Authority’s powers to regulate distribution (and transmission) network access for distributed energy services, such as batteries (Option F1). This includes tightening the rules in Part 3 of the Electricity Industry Act about the separation of distribution from other electricity services, or empowering the Electricity Authority to make targeted rules in this area.

Other options

The Paper presents several other options of particular interest to distributors:

  • E6: Ensuring access to smart meter data on reasonable terms (supported by the Panel)

  • E7: Strengthening the Commerce Commission’s powers to regulate distributors’ performance (supported)

  • E8: Requiring small distributors to amalgamate (not supported)

  • E9: Lowering distributors’ (and Transpower’s) asset values and rates of return (not supported)

  • F2: Transferring the Electricity Authority’s distribution (and transmission) regulatory functions to the Commerce Commission (not supported).

View the Options Paper here.

The Panel is seeking submissions on the Options Paper. Consultation closes on 22 March.

If you would like to discuss any of these matters and how they may directly affect your organisation, please contact our Corporate/Commercial and Regulatory experts.