Electricity Sector

Industry Overview
The New Zealand electricity industry has been subject to major reform, moving away from a structure characterised by fragmented and localised distribution and retail entities (and a dominant state owned electricity generator) to a structure of fewer network companies with competitive generation and retailing markets.

Legislative reform has required formerly integrated entities to separate their distribution networks from their retail and small scale private generation activities. The generation market has also been subject to significant change, designed to create a contestable market in electricity generation and supply.

Electricity Distribution
The approach to regulating lines businesses has traditionally been 'light-handed', with information disclosure, backed by the threat of price control, being the key restraint on monopoly pricing. With the introduction of the Government's Policy Package for the electricity industry, the Commerce Commission was made responsible for the control of prices charged by electricity line businesses.
The Commerce Commission has implemented a targeted control regime for regulating lines businesses, pursuant to the Commerce Act. The Commerce Commission has set two thresholds, a price-path threshold and a quality threshold. The thresholds are, in effect, a screening mechanism to identify lines businesses whose performance may warrant future examination and possible control. The purpose of the thresholds is to provide incentives for lines businesses to maintain the quality of services, meet consumer demands for quality while improving efficiency and sharing the benefits of efficiency gains with consumers over time.

Electricity Generation
An Electricity Commission has been established under the Electricity Act 1992 with responsibility for providing oversight of New Zealand’s electricity market. The priority of the Electricity Commission is to ensure the effective operation of the electricity market, and in particular to ensure security of supply and reserve generation, prioritisation of transmission grid investment, and hedge market and demand-side participation.

Why PricewaterhouseCoopers?
PricewaterhouseCoopers Global Energy, Utilities and Mining Group has dedicated specialists in 90 countries. Our reputation in this sector has been fortified by the major role our UK firm played in advising the Thatcher Government on the ground breaking restructure of the electricity industry in the United Kingdom over a decade ago.

In New Zealand, PricewaterhouseCoopers is the pre-eminent advisor to the electricity industry having undertaken major assignments for ECNZ, its successor companies (Genesis Power, Mighty River Power and Meridian Energy), Transpower, Contact Energy, Vector, Powerco, UnitedNetworks, TrustPower, WEL Networks (and numerous mid-size and community-owned electricity businesses).

We have also undertaken assignments on behalf of the Ministry of Economic Development, the Electricity Networks Association and Energy Trusts of New Zealand (Inc), and act for a number of local authorities and trusts in relation to their investments in the industry.

PricewaterhouseCoopers has acted as lead adviser on a number of electricity transactions notably the sale of the lines business of TrustPower - a transaction which yielded sale proceeds of $485 million, the $2.7 billion sale of UnitedNetworks. PricewaterhouseCoopers has now advised on 50 completed mergers and acquisitions in the New Zealand electricity industry with an underlying value in excess of $8.5 billion.

PricewaterhouseCoopers publishes the Electricity Line Business and Gas Pipeline Information Disclosure Compendium, which summarises the disclosure information of New Zealand's 28 electricity line businesses and 4 gas pipeline businesses, as published in the New Zealand Gazettes. The Compendium is compiled annually and is widely used by energy industry participants and their advisors as an industry reference tool. PricewaterhouseCoopers produces a regular publication‘Leading Energy’ which analyses recent transactions, provides industry updates and covers relevant issues facing the energy sector in New Zealand.