1. Pursuant to section 172I of the Electricity Act 1992 (“Act”), I notify the amendment of the Electricity Governance Rules 2003 (“Rules”) under section 172H of the Act.
2. The empowering provisions for the electricity governance regulations in relation to which the amendments to the Rules are made are sections 172D(1)(4), 172D(1)(5), 172J(1)(e) and 172KA(1) of the Act.
3. In brief, the amendments are:
(a) to Schedule F1 of Section II of Part F of the
Rules, to except New Zealand Aluminium Smelters Limited (“NZAS”) and RTA Power (NZ) Limited (“RTA Power”) from the categories of designated transmission customers in certain circumstances; and
(b) to Rule 9.1 of Section IV of Part F of the Rules to permit Transpower New Zealand Limited (“Transpower”) to impose charges additional to those set out in the transmission pricing methodology if those charges are provided for in
the Comalco agreements (as defined in Part A of the Rules).
4. Pursuant to section 172Z(4) of the Act, the reasons for my decision to amend the Rules are that:
(a) at present, NZAS and RTA Power could be designated transmission customers and therefore either:
(i) could be required to enter into a transmission agreement with Transpower under Section II of Part F of the Rules to apply from the date determined by the Electricity Commission (“Commission”) under Rule 3.1.2.1 of Section II of Part F; or
(ii) if they fail to agree on a transmission agreement by that date, the benchmark agreement set out in Schedule F2 of Section II of Part F of the Rules could apply as a default agreement between them;
(b) if NZAS and RTA Power entered into a transmission agreement with Transpower in accordance with Section II of Part F of the Rules, or the benchmark agreement were to apply as a default agreement, the terms of that agreement could conflict with rights and obligations of NZAS, RTA Power, Meridian Energy Limited and Transpower under the Comalco agreements;
(c) if Rule 9.1 of Section IV of Part F of the Rules is not amended, and a related amendment to Regulation 199 of the Electricity Governance Regulations 2003 (“Regulations”) recommended to me by the Commission is not made, Transpower would only be able to charge for transmission services provided under the Comalco agreements from 1 April 2008
in accordance with the transmission pricing methodology made under Section IV of Part F. It would not be able to charge the additional special charge that it currently does under the Comalco agreements. Although the related amendment to Regulation 199 (if made) would allow Transpower to continue to impose additional charges under the Comalco agreements, if the amendment to Rule 9.1 is not also made, the Comalco agreement parties would need to comply with the disclosure obligations in Regulations 205 and 206 of the Regulations. The Commission would also have to consider and publish the notifications in accordance with the Regulations. This is not considered necessary, as the special charge and any other additional charges payable under the Comalco agreements will not affect third parties. The amendment to Rule 9.1 of Section IV of Part F will mean that the disclosure and notification obligations will not apply; and
(d) the Commission has, after carrying out the assessment and consultation process required under the Act, recommended these amendments to me because they will:
(i) avoid:
(A) the overriding of longstanding transmission arrangements under the Comalco agreements by Section II of Part F of the Rules;
(B) transaction costs for the parties to the Comalco agreements;
(C) costs arising from inconsistencies between the Comalco agreements and any transmission agreement entered into or that applies under Part F of the Rules; and
(D) detrimental effects on regulatory certainty;
(ii) be consistent with good regulatory practice; and
(iii) contribute to the Commission’s objectives of ensuring that electricity is delivered in an efficient, fair and reliable manner while
also meeting the Commission’s objective of maintaining incentives for investment in transmission.
5. These Rules come into force on 1 April 2008.
6. Copies of the Rules may be inspected free of charge or purchased from the Electricity Commission, Level 7, ASB Bank Tower, 2 Hunter Street, Wellington.
The Rules can also be viewed on the Electricity Commission’s website:
http://www.electricitycommission.govt.nz/Rulesandregs/Rules
Dated at Wellington this 26th day of February 2008.
DAVID PARKER, Minister of Energy.