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Regulation: Exempt and Controlled Companies

Regulation: Exempt and Controlled Companies. ETNZ Spring Conference Alan Jenkins 3 November 2011. 17 Controlled (81.6% consumers ) 12 Exempt (18.4%). Controlled vs uncontrolled – comparisons (2010 data). Controlled avg = 8.52 Uncontrolled avg = 7.04. …comparisons (2010 data).

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Regulation: Exempt and Controlled Companies

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  1. Regulation: Exempt and Controlled Companies ETNZ Spring Conference Alan Jenkins 3 November 2011

  2. 17 Controlled (81.6% consumers) 12 Exempt (18.4%)

  3. Controlled vs uncontrolled – comparisons (2010 data) Controlled avg = 8.52 Uncontrolled avg = 7.04

  4. …comparisons (2010 data) Controlled avg = 302 Uncontrolled avg = 353

  5. …comparisons (2010 data) Controlled avg = 262 Uncontrolled avg = 340

  6. …comparisons (2010 data) Controlled avg = 6.4 Uncontrolled avg = 6.1

  7. Controlled vs Uncontrolled – things to bear in mind • All comparisons relate to the era before the controlled/uncontrolled differentiation. • About 5 years of post-Part 4 data needed to make any objective comparisons. • Customer density, vegetation & terrain issues, local weather conditions, network ages – all confounders that make comparisons very dubious.

  8. Losing Exempt Status • Notify the Commission within 10 working days if ceased to be consumer-owned; or • The Commission becomes aware of a change in an EDB’s status (including reaching 150,000 ICPs); or • Company’s consumers petition the Commission to make a recommendation to the Minister to apply  price-quality regulation to the EDB.

  9. …losing exempt status Which consumers might notify? • Petition from 15% of eligible residential consumers; or • Petition from 20% of ineligible consumers; or • Petition from 25% of a non-residential consumer class, by consumer numbers or by volume. - Means that, for example, 1 large industrial user might be in a position to ask for control.

  10. This underlines the importance of information disclosure • If the Commission feels that a petition is supported by disclosed evidence then it is likely to ask for control to be imposed.

  11. Remember, regulators also closing in on numbers of companies! ComCom: “Discussion needed on whether analysis should identify the benefits, if any, of a reduced number of electricity distributors.” Electricity Authority: “Recent EA strategy …suggestions, some (but not necessarily all) of which will be considered: ….Review the number of lines companies

  12. We’re in (or moving out of) the 3rd Phase of Post-War Regulation Markets 1st Governmental Regulators & lawyers everywhere

  13. Shifting Grounds for NZ Regulation • Originally driven by social equity, local employment & central planning • Price control • Import licensing • Directive investment

  14. The Douglasite Regulatory Ideal • “Bring a little bit of Hong Kong into the economy” • Replace Ministerial oversight with professional regulators with limited roles • Courts, not politicians, to hear regulatory appeals • ‘Markets first’, and regulators to concentrate on market failures

  15. Post-Douglasite Regulation • “Competition where possible, regulation where necessary” • “Necessary” mainly means monopolistic infrastructures (ports, electricity networks, gas pipelines, airports) • Began with self-regulation underpinned by public disclosures • Evolving into complex, hands-on price and performance control – productive, allocative & dynamic efficiency ideals.

  16. Todays’ Regulatory Reality • 5-6 years to define ‘current’ 5-year price & quality control for electricity & gas distributors • Apparent regulatory blind spots (asset values; whether ‘savings’ reach consumers; dulling effect of controls, consultation, & regulatory creep,…) • Multiple regulators making independent demands (and Ministers still around) • Extensive legal challenges over regulatory quality

  17. ENA responses: more collaboration • Currently looking at: • Joint purchasing • Increased standardisation • Insurance risk sharing?

  18. What about a Regulatory review? Reasons for: • Regulatory focus to date has been on economic efficiency, competition, restraining prices. Innovation in technology-reliant industries has been neglected. • Developments such as IT, fibre, EVs, are the foundations for current development growth but barely recognised in current regulatory drivers.

  19. …a Regulatory Review? • How to initiate it? • Convincing the politicians a challenge • Who should do it? • A science/engineering/technology focus, not economists • How long should it take? • The Wolak review took 18 months an cost $2 million!

  20. The Way Forward • We’ve been too focussed on yesterday’s regulatory priorities for too long • ‘R&D’ gets a rough ride under the current regulatory rules. • So does distribution innovation. • Policy makers are fixated on power markets, undervaluing power systems! • Time to put technological promise ahead of economic pessimism.

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