1. Economic Development, Science and Innovation Committee
Annual Review Hearing
1 March 2018

2. The Authority’s statutory objective has three limbs
Section 15 of the Electricity Industry Act requires the Authority to pursue the long-term benefit of consumers through three channels
Promoting competition in the electricity industry
Promoting reliable supply by the electricity industry
Promoting the efficient operation of the electricity industry

3. Competition achievements
Market share
New retailers are continuing to enter the electricity market with new products and services: there were 8 new retailers in 2016/17 and a net increase of 21 over the period 1 July 2011 to now
Switching activity
Our surveys show that between 55 and 60 per cent of consumers either switch or review their plan or provider every year
Residential price increases have been driven largely by lines charges since June 2011
The generation and retail components of electricity bills – the competitive part of the sector – decreased 1 per cent after inflation since June 2011
Lines charges (transmission and distribution) increased 18 per cent after inflation over the same time period
Innovation by retailers is occurring across all aspects of the consumer experience
Leading to more billing, pricing, product options and information for consumers
80 per cent of all customer connections in NZ now have smart meters at no direct cost to consumers – one of the highest installation rates in the world

4. Reliability and security of supply achievements
Our market monitoring activity indicates the dry hydro events in 2012, 2013 and 2017 were managed effectively
The industry responded to improved incentives created by the Authority including
A set trigger point for a conservation campaign has provided far greater certainty about when those campaigns will occur
The requirement for retailers to compensate customers for conservation campaigns
The requirement for retailers and large industrial consumers to certify they understand their risk position
Generators acted prudently, increasing thermal generation to conserve hydro lake levels
In 2016 New Zealanders on average received electricity supply 99.97% of the time – that is, they were without power on average for 2.5 hours in the year
Note that changes to workplace health and safety legislation have caused Transpower and distributors to change their approach to live line work, which is likely to mean more outages for consumers as lines are de-energised to undertake maintenance

5. Efficiency achievements
Avoided cost of transmission (ACOT) arrangements
We changed the rules in December 2016 so that distributed generation only receives special ‘side-payments’ when that generation could be avoiding transmission costs.
The net benefit from the change is estimated at $33 million and will benefit renewable generation (especially very small scale) by ‘levelling the playing field’
Reform of distribution prices
We have provided ongoing encouragement for lines companies to adopt more efficient pricing structures that reflect the actual costs to serve customers as well as the services being provided
Distributors need to change their pricing to avoid artificially discouraging or stimulating evolving technology. For example electric vehicles, batteries and solar panels
NZIER estimated for the Authority that the net benefit from changing distribution pricing exceeds $1 billion
Market initiatives and investment in the HVDC link across the Cook Strait have greatly reduced costs
Changes to frequency keeping and sharing of the service across the HVDC link have reduced the quantity purchased by 60 per cent and are saving about $30 million per annum
Efficiency achievements ….
Decision in 2016 on ACOT regime, expected efficiency benefits and expected savings for consumers, mention Trustpower court case to stymie these reforms?
Decision in 2016 on D-pricing to encourage Ds to alter their pricing structures to avoid artificially discouraging or stimulating evolving technology, the pricing moves already made by some Ds (eg WEL for new customers), potential efficiency benefits from adopting efficient D-pricing ($1.1b?)
Anything else you can think of? Needs to be decisions made rather than work under-way