Pattrick Smellie – Associate Editor

• Electricity governance targeted.
• Struggle to control prices.
• Environmental outcomes less vital.

Energy Minister Gerry Brownlee used his first major speech to the electricity industry, in Auckland this week, to outline his intention to use a newly published Business NZ report as the blueprint for a Ministerial working party on the way the sector is governed. If the report is any guide, this spells a rough time ahead for the Electricity Commission, which comes off very poorly in the report prepared for Business NZ by the economic consultancy, LECG.

The report concludes the EC is part of the problem rather than the solution to perceived electricity industry shortcomings, and realignment of its functions among a range of pre-existing agencies and parties - the Treasury, Ministry for Economic Development, EECA, and the Minister of Energy him or herself, to name a few - would lead to better national and industry outcomes.

Rather than reinvent the wheel, Brownlee says he wants to form a Ministerial working party on electricity industry governance which will use the Business NZ report as a starting point. This swift success will be both a surprise and delight to Business NZ’s Phil O’Reilly. Brownlee’s enthusiasm is as much gratitude for something to sink his political teeth into in the notoriously difficult area of electricity market design as it is for a solid piece of analysis. While he has jawboned Meridian into lower price increases than it was planning, and talked tough before and after the election about electricity pricing, he has been confronting the Canute-like conundrum faced by most Energy Ministers in the last 20 years.

There is an inescapable commercial and economic logic, let alone environmental benefit, in energy prices rising. Energy sources are scarcer and new forms of generation more expensive than in the past, and there’s only so much a Govt can do about that.
Brownlee’s speech to the annual National Power Conference also dwelt briefly on this political problem, making clear the Key Govt will be less purist in pursuit of the best environmental outcomes, rebalancing national energy strategy to give more weight to lower cost, more secure generation forms - good news for generators pursuing geothermal and thermal (gas or coal) options, if not necessarily helpful for carbon emissions targets.

Brownlee also outlined his desire to unlock NZ’s mineral and petro-chemical potential more quickly, and signalled a new burst of policy work in this area also.

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