ENERGY AND RESOURCES
BRIEFING FOR THE INCOMING MINISTER
THIS DOCUMENT HAS BEEN PROACTIVELY RELEASED. REDACTIONS MADE TO THE DOCUMENT HAVE
BEEN MADE CONSISTENT WITH THE PROVISIONS OF THE OFFICIAL INFORMATION ACT 1982.
October 2014
Purpose
The purpose of this initial briefing is to give the Incoming Minister sufficient information to meet their
initial requirement. It is not intended to be a detailed analysis of the portfolio or of policy issues.
The briefing is part of a wider process. Ministers will be able to call for a fuller briefing on issues of
interest and importance to them during that process. This allows the initial briefing to be wide ranging,
enabling the Minister to see the breadth of the portfolio, while still being concise.
Contents
1.
Portfolio overview .................................................................................................................... 3
2.
Portfolio responsibilities ........................................................................................................... 7
Minister’s responsibilities .................................................................................................................... 7
Portfolio functions and responsibilities............................................................................................... 7
Key MBIE officials ................................................................................................................................ 7
Legislative responsibilities ................................................................................................................... 9
Crown entities.................................................................................................................................... 10
3.
Focus for the first 100 days ..................................................................................................... 13
Key policy and implementation issues .............................................................................................. 13
Pending decisions and actions........................................................................................................... 13
Upcoming events, publications, appointments, and announcements ............................................. 16
4.
Beyond the first 100 days ........................................................................................................ 17
5.
Major links with other portfolios ............................................................................................. 20
6.
Annexes.................................................................................................................................. 21
Annex 1: Funds and appropriations .................................................................................................. 21
Annex 2: Relevant legislation ............................................................................................................ 22
Annex 3: Key international energy relationships and agreements ................................................... 23
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1. Portfolio overview
The energy and resources sector makes an important contribution to New Zealand’s economy…
Your portfolio is crucial to enabling businesses and households to have access to reliable, affordable
energy. In doing so, it underpins the performance of businesses (including major export industries
such as dairy) and the mobility, comfort and health of New Zealanders.
This portfolio also has an important role to play in ensuring New Zealanders benefit from the
upstream development of our abundant (renewable and non-renewable) resources. Petroleum and
mineral resource development make an important contribution to regional and national economic
growth and employment, electricity generation, and construction.
Global trends will increasingly influence New Zealand’s energy and resources sector, which is
heading into a period of change…
Global demand for fossil fuels is expected to continue to grow, and prices may keep rising and be
volatile. At the same time, it is anticipated that there will be increasing geopolitical and economic
pressure to increase action on climate change globally. New technologies, behaviours and business
models are bringing opportunities to raise energy productivity and reduce emissions.
New Zealand has abundant energy resources…
We are a world leader in geothermal energy, have world class wind resources, extensive hydroelectricity and forestry resources as a potential source of biofuels. We have a diverse (multicommodity) minerals sector playing an essential role in our economy, and many sedimentary basins
are known to have working petroleum systems – only one of which is currently in production
(Taranaki).
The share of electricity generation from renewables was 79 percent in the year to June 2014, up
from 74 percent in the previous year, reflecting new geothermal generation plants and the
mothballing of a coal and gas-fired unit at Huntly power station 1. This contributes to the
government target of 90 percent renewable electricity generation by 2025. Figure one below shows
the changing generation profile over the last 40 years (where ‘other renewables’ is wind and
geothermal).
There are opportunities to further develop those resources…
There is currently 3440 MW 2 of consented new renewable generation available for development
(largely geothermal and wind), and there are further opportunities for direct use of geothermal heat
in commercial and industrial applications. There is also potential to use forestry waste to coproduce liquid biofuels and biomass for heat. This provides another opportunity to reduce the
1
The share of renewables can be significantly reduced in years with very low rainfall due to the high
proportion of hydro-electricity.
2
77 percent of total consented generation
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impact of fossil fuel prices on our economy, grow a new domestic industry, and reduce carbon
emissions. The commercial viability of this opportunity is being explored through the Primary
Growth Partnership (between the Ministry of Primary Industries and industry players), and the
Energy Efficiency and Conservation Authority (EECA) actively promotes biofuel and biomass options.
Figure 1: Electricity Generation by Fuel 1974-2013
50,000
Total Generation
Electricity Generation (GWh)
45,000
40,000
Hydro
35,000
30,000
Hydro Moving Average
25,000
20,000
Fossil Fuelled
15,000
10,000
Fossil Fuelled Moving
Average
5,000
Other Renewables
2013
2010
2007
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
0
Fossil fuel resources are expected to play a significant role in meeting global energy demand for
some time…
World demand for fossil fuels continues to grow at the same time as existing fields are being
depleted and new more costly to access fields developed. Forecasts from agencies such as the
International Energy Agency suggest that over the next few decades there will remain a significant
market for petroleum. New Zealand can play a role in meeting that demand, and being a petroleum
exporter also offers us a hedge against potentially high and volatile fossil fuel prices in future, and a
potential tool to manage the associated economic impact.
Our focus on development has been paying off
The move to annual block offers and mineral tenders has attracted new and credible players. We
have seen established players like Shell broaden their activities, and exploration at near record
levels. Exploration has helped boost the future of existing fields, securing a very positive increase in
gas reserves, but there have not been any new fields discovered. This means we need to keep
working to stay on the radar of international investors. This is driving the on-going review and
testing of key aspects of the management of the Crown’s petroleum and minerals estate.
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There has been a substantial upgrading of the whole regulatory regime for resources
Health and safety and environmental regimes have been strengthened, and there have been
changes to the Crown Minerals Act. This has included revised Exclusive Economic Zone (EEZ)
legislation and a new central role for the Environmental Protection Authority (EPA). Some work
remains to be done, but the focus is on bedding down and refinement. Continuing to lift public
confidence in the robustness of environmental and safety protections is critical.
Energy intensity has improved, but carbon emissions are forecast to increase…
There has been a reduction in energy intensity and demand for electricity is now growing at a slower
rate than the economy. However, carbon emissions from the energy sector continue to be well
above 1990 levels. Technologies are emerging, especially in solar photovoltaic and information and
communications, which offer the potential over time to reduce emissions and further improve
energy productivity.
Transport remains a particular challenge as transport fuel use contributes to over 40 percent of
energy sector emissions, and is forecast to increase. The development of alternative fuels, modes
and vehicle technologies offer the potential for changes in energy demand patterns over time. Fuel
switching in industrial heat applications also provides an opportunity to reduce emissions.
Household energy efficiency is improving…
Over 265,000 homes (of which over 123,000 are ‘low income’) have been insulated under the WarmUp New Zealand: Heat Smart / Healthy Homes programmes provided by EECA. Insulation makes
homes cheaper and easier to heat to healthy temperatures, and reduces health risks caused by cold
and damp housing, such as serious diseases like rheumatic fever. Household demand for electricity
is reducing, which could partly be attributed to energy efficiency improvements in household
products, such as heat pumps and lighting, and changing consumer behaviours.
Improvements to energy market regulation are delivering results…
Electricity security of supply has improved, with investment in generation and new lines
infrastructure and hydro shortages being increasingly well managed by industry. We now have a
more diverse and resilient supply of gas that continues to be an essential component of our energy
supply. Increased retail competition for electricity customers has resulting in significant discounts
and enhanced offers, which has also benefited gas consumers. The rate of increases in residential
electricity prices has slowed, and the latest increases are a result of increasing line charges (which
are subject to oversight by the Commerce Commission).
Your portfolio needs to play a leading role across government…
This portfolio has important links with other portfolios, and achieving the best outcomes involves
working closely with them. As Minister for both Energy and Resources and Transport, there are
opportunities for alignment. Particular areas include: offshore regulation of petroleum and minerals
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activity, and energy strategy (given the significance of transport fuel demand). Other portfolios that
the Energy and Resources portfolio has important links with (also shown in section 5) are:
•
Economic Development – due to its importance to business growth
•
Environment (including the EPA), Workplace Relations and Safety (including WorkSafe New
Zealand) and Conservation – mainly in relation to the Resource Management Act
(consenting, freshwater quality and allocation), and EEZ and health and safety legislation and
regulations
•
Commerce and Consumer Affairs – in relation to competition and consumer legislation, and
the regulation of electricity lines (including Transpower) and gas pipeline businesses
•
Housing and Climate Change– in relation to energy demand, insulation, energy efficiency
and carbon emissions.
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2. Portfolio responsibilities
Minister’s responsibilities
As Minister of Energy and Resources you have statutory responsibilities for Vote Energy funds and
appropriations (Annex 1 provides a snapshot for 2014/15).
The key legislation you are responsible for is listed below, including your functions, duties and
powers under each. Other legislation relevant to your portfolio is listed in Annex 2.
You are also responsible for five Crown entities and statutory bodies (listed below).
Portfolio functions and responsibilities
The Vote Energy funds and appropriations provide for MBIE and associated Crown entities to
undertake the following functions:
•
provision of policy advice (including second opinion advice and contributions to policy advice
led by other agencies) to support decision-making by Ministers on government policy
matters
•
monitoring the performance of five Crown Entities and statutory bodies
•
managing the regime for the exploration and development of petroleum, mineral and coal
resources
•
promoting New Zealand for international and domestic investment to enable the Crown's
petroleum and mineral resources to contribute to the economic development of New
Zealand
•
provision of projections and analyses of energy supply and demand and greenhouse gas
emissions
•
managing statistical collections on energy and energy sector greenhouse gas emissions
•
servicing New Zealand's membership of international energy organisations, such as the
International Energy Agency (IEA) and APEC Energy Working Group (details in Annex 3)
•
ensuring appropriate regulatory settings for liquid transport fuel specifications.
Key MBIE officials
Work on Energy and Resources is mainly undertaken by two branches of MBIE within the
Infrastructure and Resource Markets Group – Resources, Energy and Communications, and New
Zealand Petroleum & Minerals (NZP&M).
In addition, the Modelling and Sector Trends team in the Office of the Deputy Chief Executive
provide supporting information and advice. Key MBIE officials and their position are set out below.
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Policy Directors:
Elisabeth Numan
Paul Alexander
Resources, Energy
and Communications
General Manager:
Bruce Parkes
Energy Markets Policy
Manager: Jamie Kerr
Resource Markets Policy
Acting Manager: Andrew Millar
Policy Director: Andrew Annakin
National Manager Petroleum:
Vacant
Infrastructure and
Resource Markets
Group
Deputy Chief
Executive:
Andrew Crisp
National Manager Minerals:
NZ Petroleum &
Minerals
General Manager:
James StevensonWallace
Sefton Darby
Geoscience Information Services
Manager:
Richard Garlic
Business Performance Manager:
Donna Royal
Stakeholder Relationships
Manager:
Jonathan Gibbard
Chief Maori Advisor:
Vacant
Office of the Deputy
Chief Executive
Executive Director:
Adam Cooper
Manager Modelling and Sector
Trends:
Bryan Field
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The Energy Safety team (Operations Manager Mark Wogan) in WorkSafe promotes high safety and
quality standards in energy networks, installations and products. Briefing material on Energy Safety
is included in the WorkSafe BIM.
Across the wider organisation, MBIE has responsibility for providing policy advice in a number of
related portfolios unified by a single economic objective of Growing New Zealand for All (refer
Section 5).
Legislative responsibilities
The key legislation you are responsible for is listed below.
Crown Minerals Act 1991
The Crown Minerals Act sets out the management regime for Crown-owned minerals, covering
policies and procedures for the efficient allocation of the Crown's minerals and for obtaining a fair
financial return.
Crown-owned minerals include all petroleum, gold, silver and uranium, as well as all minerals in the
territorial sea, EEZ and extended continental shelf. Other minerals (e.g. coal, iron sands, aggregates)
have a mixture of Crown and private ownership. Privately owned minerals do not fall under this Act.
Your key responsibilities under this Act, many of which are delegated to NZP&M, are:
•
attracting applications for prospecting, exploration, or mining permits, including by way of
public tender
•
granting permits and subsequent changes to permits, and revoking permits
•
deciding whether to reserve areas of land containing Crown Minerals for more strategic
allocation (a power retained by you as Minister)
•
preparation of minerals programmes
•
co-operation with regulatory agencies that perform functions in relation to Crown owned
minerals
•
collecting and disclosing information in connection with mineral resources and mineral
production
•
recommending regulations on a range of related matters, including for setting royalties and
fees.
Electricity Industry Act 2010
The Electricity Industry Act provides a framework for the regulation of the electricity industry. It sets
out the Electricity Authority’s functions, objectives and monitoring and enforcement powers, and
provides for the Electricity Industry Participation Code (the Code), which are the industry “rules”.
The Act also sets out requirements relating to the separation of distribution and certain generation
and retail activities, places an obligation on distributors to maintain supply in certain circumstances,
and contains a range of regulation-making powers.
It provides for the industry consumer dispute resolution scheme, but the Minister of Commerce and
Consumer Affairs is responsible for these provisions.
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Your key responsibilities under this Act are:
•
recommending regulations on issues such as enforcement of the Code, the industry levy,
and fairness and equity
•
recommending appointments to the Electricity Authority and Rulings Panel.
Energy Efficiency and Conservation Act 2000
The Energy Efficiency and Conservation Act established the Energy Efficiency and Conservation
Authority (EECA), and forms the legislative basis for promoting energy efficiency, energy
conservation and renewable energy. It includes regulation making powers for product energy
efficiency standards and labelling, as well as the disclosure of information to compile statistics on
energy efficiency, energy conservation and renewable energy. Your key responsibilities under this
Act are:
•
ensuring that there is a National Energy Efficiency and Conservation Strategy (NZEECS) in
force, and that it is developed according to the requirements in the Act
•
recommending regulations on minimum energy performance standards and labelling for
energy-using products and services (including vehicles), and on data collection
•
appointing the EECA Board.
Gas Act 1992
The Gas Act sets out the regulatory framework for gas, including providing for co-regulation with a
gas industry body. It contains wide-ranging, regulation-making powers for gas safety, quality and
measurement, as well as industry governance. Your key responsibilities under this Act are:
•
recommending regulations on issues such as market governance and operation,
enforcement, the industry levy, and certain consumer issues
•
recommending approval of the industry co-regulator (currently the Gas Industry Company),
and appointing the Rulings Panel
•
accepting or rejecting recommendations from the Gas Industry Company for changes to
industry rules
•
recommending Orders in Council for gas operator status, which confer land access powers in
relation to roads and rail crossings, and approving Gas Codes of Practice.
Crown entities
Your role in relation to Crown entities is to oversee and manage the Crown’s interests in and
relationship with the five entities described in this section. This includes ensuring an effective board
is in place, participating in setting the entity's strategic direction and funding, and reviewing the
entity's performance and management of risk.
The expectation is that all parties will adhere to the “no surprises” convention. While these entities
are managed at arms-length from government, as Minister you have a number of levers to ensure
you can get the performance you want.
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The Energy Markets policy team (Jamie Kerr, Manager) lead MBIE’s engagement with these entities,
and will support you in your oversight and management role.
Electricity Authority
The Electricity Authority (EA) is an independent Crown entity established under the Electricity
Industry Act 2010, and is responsible for regulating the electricity market. While the nature of an
independent Crown entity’s functions involves independence from Ministerial intervention, there is
still an expectation of dialogue on strategic direction and annual expectations.
Current members of the EA Board are: Dr Brent Layton (Chair), David Bull, Susan Paterson, Hon
Roger Sowry and Elena Trout. The Chief Executive is Carl Hansen.
The statutory objective of the EA is to promote competition in, reliable supply by, and the efficient
operation of, the electricity industry for the long-term benefit of consumers. The EA's main
functions include:
•
making and administering the rules governing the electricity industry through an Electricity
Industry Participation Code
•
monitoring compliance with the code and other provisions in the Electricity Industry Act and
regulations and taking enforcement action
•
undertaking market facilitation measures such as education and providing guidelines,
information and model arrangements
•
industry and market monitoring, and carrying out reviews, studies and inquiries into matters
relating to the industry
•
contracting for market operation services and system operator services.
Electricity Industry Rulings Panel
The Electricity Industry Rulings Panel is a specialist dispute resolution and disciplinary body that
determines complaints of breaches of the Electricity Industry Participation Code 2010 by industry
participants, as referred to it by the EA. It also determines certain disputes between participants
and hears appeals on specific decisions by the System Operator (Transpower).
The panel is appointed by the Governor-General on your recommendation. Before making a
recommendation, you must first consult with the Minister of Justice and the EA. Current members
are Peter Dengate Thrush (Chair), Geraldine Baumann (Deputy Chair), Susan Roberts, Nicola Wills
and John O’Sullivan.
Gas Industry Company
The Gas Industry Company (GIC) is the private industry body that co-regulates the gas industry with
you (as the Minister) under the Gas Act 1992. Under the Gas Act, GIC has powers to recommend
certain gas governance regulations to you, and you have the power to accept or reject those
recommendations. For certain issues, you may only promulgate regulations that are based on a
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recommendation from GIC. For others, you must provide GIC a reasonable opportunity to make a
recommendation to you before promulgating regulations. These constraints on your powers are
designed to capture the benefits of industry self-governance, while ensuring that there is high-level
ministerial oversight of the industry.
Current directors on the GIC board are Rt Hon James (Jim) Bolger (Chair), Robin Hill (Deputy Chair),
Andrew Brown, Keith Davis, Nigel Barbour, Dennis Barnes and Andrew Knight. The Chief Executive is
Steve Bielby.
Gas Industry Rulings Panel
The panel is the final arbiter of disputes arising from activities under gas governance rules and
regulations. The panel will approve or reject settlements recommended following investigation,
determine unresolved matters and make orders, including remedies and penalties.
The panel is appointed by you following nomination by GIC. The current panel is Hon Justice John
Hansen.
Energy Efficiency and Conservation Authority
EECA is a Crown Entity established under the Energy Efficiency and Conservation Act 2000 (the Act).
It has responsibility for working to improve New Zealanders’ energy choices across all sectors of the
economy. The Act requires EECA to encourage, promote and support energy efficiency, energy
conservation and the use of renewable sources of energy.
EECA’s work programme focuses on the delivery of the actions outlined in the New Zealand Energy
Efficiency and Conservation Strategy (NZEECS) that are assigned to EECA as the delivery agent. EECA
also works closely with other government agencies to help them to design, implement and monitor
policies to promote energy efficiency and make better use of New Zealand’s abundant renewable
energy resources. As a Crown agent, EECA must give effect to government policy when directed by
the responsible Minister.
The Chief Executive is Mike Underhill. Current Board members are Tom Campbell (Chair), Marion
Cowden (Deputy Chair), David Coull, Mervyn English, Elena Trout and Janet Carson.
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3. Focus for the first 100 days
Key policy and implementation issues
We have identified the following policy and operational issues for your immediate attention.
Pending decisions and actions
Issue
Reason
Timing
Legislative changes underway
Energy (Fuels, Levies,
and References)
Amendment Bill
The purpose of the Bill is to shift the costs of
meeting New Zealand’s oil stockholding
treaty obligations from the Crown to third
party funding (through a levy on fuel)
Awaiting Second Reading (the
Commerce Committee Report was
delivered on 1 July 2014)
Policy and operational decisions
[Information withheld
consistent with
s9(2)(f)(iv) of the Official
Information Act 1982]
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of the Official Information Act 1982]
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consistent with
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of the Official Information Act 1982]
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Issue
Reason
Timing
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of the Official Information Act 1982]
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Act 1982]
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of the Official Information Act 1982]
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of the Official Information Act 1982]
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of the Official Information Act 1982]
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of the Official Information Act 1982]
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s9(2)(f)(iv) of the Official Information
Act 1982]
While not directly within your responsibilities, the following imminent issues have significant implications
for your portfolio
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consistent with
s9(2)(f)(iv) of the Official
Information Act 1982]
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consistent with
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Information Act 1982]
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of the Official Information Act 1982]
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Act 1982]
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consistent with
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of the Official Information Act 1982]
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consistent with
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Issue
Reason
Timing
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Information Act 1982]
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of the Official Information Act 1982]
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of the Official Information Act 1982]
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Upcoming events, publications, appointments, and announcements
Issue
Reason
Timing
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withheld consistent
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Official Information Act 1982]
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withheld consistent
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1982]
EA electricity levy
consultation
Annual legislative requirement to consult on level and
use of electricity levy for market regulation – the EA will
brief you prior to releasing the consultation paper
October 2014
EECA electricity levy
consultation
Annual legislative requirement to consult on level and
use of electricity levy for energy efficiency – your
approval to release the consultation will be sought
October 2014
[Information withheld consistent with s9(2)(f)(iv) of the
Official Information Act 1982]
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withheld consistent
with s9(2)(f)(iv) of
the Official
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1982]
Data release: quarterly
electricity price indicator
and statistics
Regular statistical release by MBIE
September 2014
Data release: electricity
disconnections
Regular statistical report and monitoring by the
EA/MBIE
November 2014
Attendance at events
Reports to be released
Appointments
[Information withheld
consistent with s9(2)(f)(iv) of
the Official Information Act
1982]
Other announcements
You will receive further advice on each issue over the coming weeks, and we welcome the
opportunity to engage early on these matters.
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4. Beyond the first 100 days
After an extended period of stable technology and a stable energy mix, the energy and resources
sector is moving into a period of change.
There are three global trends influencing the energy and resources sector that will need to shape the
approach to policy and regulation in New Zealand:
New technologies, behaviours and business models are bringing opportunities to raise energy
productivity.
Information and Communications Technology (ICT) is enabling system capabilities to expand, and
consumer expectations are rising. The transition to a portable, interconnected, consumer centric
electricity service is underway, with increasingly decentralised control over demand and supply.
Advances in technologies (such as in fracking and geothermal generation) are also enabling
economic access to new energy sources.
World demand for fossil fuels is continuing to grow and prices may increase.
Substantial new investment is being made globally in petroleum exploration but also in alternatives.
Production and use of biofuels and electric vehicles are increasing (but from a low base) and many
nations with oil dependent electricity generation are exploring alternative sources. However, fossil
fuels are expected to play a significant role in the global energy system for some time to come and
an orderly transition to low carbon economies is necessary. The impact of oil price volatility on
economies is material.
Geopolitical and economic pressure to take action on carbon emissions will increase.
While there is continued uncertainty about a global response to climate change, action on carbon
emissions is increasing (including in China). Delays risk potentially increasing the nature of the
challenge (and cost) of meeting any future global consensus on action. Expectations of country
contributions to emissions reductions are increasing. A price of carbon that is much higher than
current prices is likely.
Transitions don’t follow a straight line – how and when this will play out is not yet clear.
The transition path to a low carbon, high energy productivity economy is uncertain, both in terms of
timing and technology. While some changes are evident already, and could potentially develop
quite rapidly, others may take longer. The energy and resources sector involves large scale, lumpy
investments which take time to develop and build.
All parts of the sector have a role to play – from investors, innovators, consumers, to businesses and
government.
Your Energy and Resources and Transport portfolios will play an important role in orderly transition,
together with the Climate Change portfolio.
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The big issues that will need to be tackled are
How best to capture the opportunities and manage the risks from technology change.
For example, emerging technology, especially solar PV and ICT, presents opportunities to lower costs
and improve reliability, but there are real transition issues for the distribution network. Distribution
costs could increase rapidly as a result of changing power flows for which the networks were not
originally designed, and/or if some consumers bypass the grid or otherwise avoid paying for their
share of the network costs.
Ensuring New Zealand maximises the potential of abundant renewable resources to help
transition the economy in three areas – transport fuel emissions, industrial process heat, and
renewable electricity.
Transport fuel emissions are a major global challenge. The use of alternative fuels is growing
globally – but has some way to go to reach scale. Agriculture and forestry bi-products offer a
potential opportunity here, and indeed small amounts are being produced. Electric powered
transport is another opportunity given our renewables dominated electricity generation. Electric
vehicle prices and reliability will continue to improve.
Industrial process heat accounts for around 16 percent of our energy related emissions due to the
use of coal and gas. Forestry bi-products and the development of geothermal offer opportunities for
switching industrial heating away from fossil fuels.
We have one of the highest proportions of renewable generation for electricity in the world, and it
continues to grow. There are opportunities for further development as coal and gas fuelled
electricity generation still accounts for around 20 percent of energy emissions.
Determining the appropriate level of post-2020 emissions targets prior to international
negotiations in 2015.
Energy use accounts for 42 percent of New Zealand’s carbon emissions, and if agriculture emissions
are included in an international agreement, meeting our obligations could rely on energy sector
emissions savings. Energy intensity in New Zealand continues to fall, but carbon emissions are
projected to increase.
Ensuring that today and throughout the transition, downward pressure on prices is strong.
There is a need to ensure that there is continued competitive pressure on prices for all consumer
energy sources during and beyond this period of change. Effective competition in the electricity
market is leading to lower price increases, backed by a strong regulatory work programme aimed at
improving the operation of the retail and wholesale markets. However, the affordability of energy
remains an issue for some New Zealanders. Better data is needed on energy affordability, but the
issue is apparent in the increase in household electricity disconnections due to non-payment in
recent years. Electricity retailers are taking action to address this through improved credit
management practices. Transport fuel margins have been rising and a better understanding of the
drivers of this is important.
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Continual tuning of the regulatory and business environment will be required
Existing regulatory and market settings leave New Zealand well-placed to deal with the issues facing
the energy sector. However, the speed with which these issues play out, and how they interact, is
uncertain. Our market based approach places businesses and consumers at the forefront of the
response, but it will be essential to ensure that any apparent regulatory impediments to innovation
in the sector are addressed.
Government must also work closely with market participants to understand how these issues play
out, in particular the disruptive nature of technology change. Informed by this understanding,
government may need to take a more active role where market incentives or structure impede
innovation or where the outcomes may be undesirable from a broader social, environmental or
economic perspective.
We are ready to provide further advice on any of these areas should you request it. We welcome
the opportunity for an in-depth strategic conversation on any of these issues.
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5. Major links with other portfolios
This portfolio also has important links with a number of other portfolios. The key relationships are
outlined in the following diagram.
The State Owned Enterprises (SOE) portfolio is also significant due to two key SOEs in the energy and
resources sector – Solid Energy (as the single largest Crown minerals permit holder) and Transpower
(who plan, build, maintain and operate the national electricity grid).
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6. Annexes
Annex 1: Funds and appropriations
The total Energy and Resources Vote for 2014/15 is $178 million. As Minister of Energy and
Resources, you are responsible for the following:
Consolidated
Fund
Expected
revenue
stream
Electricity
industry levies
$87.5m
VOTE
ENERGY
14/15
EA
$74.5m
(fully levy funded)
Including:
System
Operator
service contract
with
Transpower
$40m
Repayment of
Crown energy
efficiency loans
$2m
Emergency
management
by System
Operator
up to $6m
MBIE Expenses
Implementation
& funding of
home insulation
scheme
$35m
Energy
Efficiency
Crown Loans
Scheme
$2m
$37m
Including:
Petroleum &
minerals data
acquisition
$2m
Policy advice
& Ministerial
servicing
$6m
IEA
membership
& oil stock
obligations
$7m
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NZP&M
Crown-owned
estate
management
$17m
Energy and
resources
information
$3m
Fuel quality
monitoring
programme
$1m
Annex 2: Relevant legislation
Key legislation is set out in Section 2 (the Crown Minerals Act, Electricity Industry Act, Energy
Efficiency and Conservation Act and Gas Act). Other legislation core to your portfolio is:
Electricity Act 1992 – sets out the regulatory framework for electricity supply and contains wideranging regulation-making powers for matters of electrical safety, quality and measurement. As
Minister, you may grant and revoke applications for electricity operator status, conferring or
removing land access powers in relation to roads and rail crossings.
Atomic Energy Act 1945 – sets out the regulatory framework for the means of producing atomic
energy in New Zealand, including the mining of uranium and other substances that may be used for
the production of atomic energy and the vesting of such substances in the Crown.
Energy Companies Act 1992 – provided for the formation of energy companies, the vesting in such
companies of the undertakings of electric power boards and the electricity and gas undertakings of
local authorities, and the dissolution of electric power boards.
Energy Resources Levy Act 1976 – imposes a levy on the production of open-cast coal and natural
gas produced from discoveries made before 1 January 1986. The levy was introduced in the mid1970s to adjust price relativities between oil, gas and coal in response to the international oil shocks
at the time. Revenue from this levy is paid into the Consolidated Fund.
Lake Taupo Compensation Claims Act 1947 – relates to agreements about the control of the
Waikato River for the purposes of flood control and electricity generation. The act sets a maximum
working level for Lake Taupo which you can alter by Gazette notice, and also provides the basis on
which compensation will be assessed for any claims in relation to the control of the lake level.
Manapouri – Te Anau Development Act 1963 – your role under this Act is to notify by Gazette
notice the operating guidelines for the levels of the two lakes which are recommended by the
Guardians of Lakes Manapouri and Te Anau (appointed by the Minister for Conservation).
Ngai Tahu (Pounamu Vesting) Act 1997 – formally made Te Runanga o Ngāi Tahu responsible for the
ownership and management of pounamu.
Petroleum Demand Restraint Act 1981 – authorises regulation-making for the purpose of
restraining demand, reducing consumption or ensuring the equitable distribution of processed
petroleum products if they are, or are likely to be, in short supply.
Petroleum Demand Restraint (Regulations Validation and Revocation) Act 1981 – validated and
confirmed regulations made under the Petroleum Demand Restraint Act 1981 and also revoked
certain regulations continued in force by that Act.
Petroleum Sector Reform Act 1988 – removed licensing requirements for retailing and wholesaling
of petroleum products, thereby completing the deregulation of the sector.
Synthetic Fuels Plant (Effluent Disposal) Empowering Act 1983 – gives the right to discharge plant
effluent.
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Annex 3: Key international energy relationships and
agreements
The key international engagements within this portfolio are listed below.
Council of Australian Governments (COAG) Energy Council
You are a member of the COAG Energy Council, along with energy and resources Ministers from the
Australian states and territories. The Council was created when the COAG Ministerial Councils were
streamlined recently. While the Council’s focus is on Australian issues, it is a useful forum for transTasman discussions on areas of common interest, and provides a vehicle for information sharing and
collaboration. The Council oversees the joint Equipment Energy Efficiency (E3) programme that
EECA is associated with. The next meeting is in December 2014.
International Energy Agency (IEA) and the International Energy Programme (IEP)
The IEA is an autonomous agency within the Organisation for Economic Co-operation and
Development (OECD) and is New Zealand’s principal international energy relationship. It was
established following the 1973/1974 oil crisis to implement measures to mitigate the risks of future
oil supply disruptions. Meetings are biennial and the next meeting is in November 2015.
As a member of the IEA and signatory to the IEP, we are required to hold petroleum reserves
equivalent to 90 days of net imports. We currently comply with this obligation by augmenting local
stocks with bilateral treaties/agreements to hold stock in other IEA countries, namely Australia,
Denmark, Japan, the Netherlands, Spain, and the United Kingdom.
Asia-Pacific Economic Cooperation (APEC) Energy Working Group (EWG)
The APEC EWG is one of eleven officials-level APEC sectoral working groups. It has a programme of
work to maximise the energy sector's contribution to the APEC region's economic and social
wellbeing. All EWG decisions are non-binding. APEC energy ministers meet approximately once
every two years, with the most recent meeting held in China on 2-3 September 2014.
APEC Fossil Fuel Subsidy Reform Peer Review
New Zealand is a lead member of the Friends of Fossil Fuel Subsidy Reform group and has
volunteered for an APEC peer review of our domestic support measures for fossil fuels. The review
will look to identify any inefficient fossil fuel subsides and will take place in March 2015.
Preparations have already commenced and the immediate focus is on technical work and preparing
material for the review panel.
International Energy Forum (IEF) Charter
The IEF is an international dialogue between petroleum-producing and petroleum-consuming
nations, and is the world’s largest energy ministers forum. As a signatory, New Zealand has pledged
to a number of IEF objectives, principally to foster greater mutual understanding and awareness of
common energy interests among IEF members. The IEF presents a good an opportunity for bilateral
meetings. The next meeting is in 2016.
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