Background to regulation

Following the electricity industry reforms in the late 1980s New Zealand's electricity market had been subject to few legislative and government restrictions. The industry was largely self-regulating although the sector continued to undergo major changes.

In December 2000 the government released a Government Policy Statement that included a new governance structure for New Zealand's electricity market. It provided guidance on the establishment of an industry self-governance body, the Electricity Governance Board (EGB). This followed a ministerial inquiry into the electricity industry that reported to the Minister of Energy in May 2000.

Electricity industry participants began the development of an integrated set of self-regulatory arrangements for the electricity sector. The arrangements, covering the wholesale market, retail market, transmission and grid security issues, were authorised by the Commerce Commission in September 2002, subject to four conditions.

In April 2003, the Electricity Governance Establishment Committee (EGEC) completed its development of an integrated set of self-regulatory arrangements proposed for the electricity sector.

The EGEC held a referendum to gauge the level of support for the new arrangements.  Votes in the referendum were allocated one third to each of three classes: consumers, traders (generators and retailers), and transporters (lines companies and national grid owner Transpower).

The referendum was conducted during April and May 2003.

Support from industry participants and consumer representatives for the new rules was 40.8% of the votes cast. There was not the substantial majority needed for the rules to proceed.

The referendum received 4.5% support in the consumer class, 66.2% in the trader class, and 53.2% in the transporter class.

Because industry participants and consumer representatives were unable to reach agreements on self-governance arrangements in early 2003, the government established the Electricity Commission in September 2003, to oversee New Zealand's electricity and markets.

The Commission regulates the operation of the electricity industry and markets (wholesale and retail) in accordance with the Electricity Act and government energy policy.

The Electricity Commission is responsible for overseeing the governance and operations of New Zealands electricity market.

The market is governed by the Electricity Act 1992.

New Zealand's electricity industry components include generation, transmission, distribution, retail and consumption.

For more information about the Commission establishment visit: www.med.govt.nz/ers/electric.html

For more background information on how New Zealand's electricity market operated under the previous self-regulatory regime see www.nzelectricity.co.nz