NZ power sector can't copy Europe: transmission chief

Ever-increasing government and quasi-government regulation and costs are threatening much needed infrastructural investment, says Powerco boss Steven Boulton.
NZ power sector can't copy Europe: transmission chief NZ power sector can't copy Europe: transmission chief NZ power sector can't copy Europe: transmission chief NZ power sector can't copy Europe: transmission chief NZ power sector can't copy Europe: transmission chief

He told the Utilities and Infrastructure Conference yesterday that some parts of the lines sector had seen regulatory-related business compliance and utility rating costs jump more than 20-fold in the past three years.

Ongoing infrastructure investment in the core electricity, gas and transport sector was pivotal to building the foundation for New Zealand's economic growth. "Yet we are now seeing the result of a regulatory environment that continues to produce regulations that simply focus on short-term price and popular outcomes, but with no reference to needed investments."

New Zealand's small size and limited resources meant it needed to align its regulatory regimes more in favour of long-term infrastructure investment, which would then provide the foundation for stimulating broader business development and assisting national economic growth.

The broader international financial community would be required to fund multi-billion-dollar electricity network upgrades, and to attract that funding New Zealand needed a certain, stable, long-term focused and rewarding regulatory regime.

"It seems we are lost in the swamp of regulatory illusion - an illusion that in the short term will produce a scenario of 'being in control' but in the long term will only succeed in killing off asset investment.

"If this illusion becomes reality, New Zealand will have the most expensive and invasive regulatory environment and at the same time an asset infrastructure that is strangled for funds," warned Boulton.

It was nonsense to try to copy European regulatory regimes when New Zealand could sometimes only sustain single operators in some regional markets.

Consumers would ultimately pay for this almost unprecedented cost imposition - this "regulatory creep" that had no quantified public benefit.

These costs would soon equate to a large percentage of a lines company's direct maintenance costs, said Boulton, echoing what WEL Energy boss Mike Underhill told the Commerce Commission last week. Underhill said total uncontrollable costs would represent about 18% of WEL's 2003 budget.

Boulton said it would be better to improve networks to meet customers' growing needs for "digital-age electricity supply", rather than focusing on regulation.

"We can have either the world's leading regulatory design or we can have ongoing investment in electricity infrastructure, but we can't have both," he concluded.

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