Caygill defends generators from Wolak spin

Friday 31st July 2009

New Zealanders have been convinced they were overcharged $4.3 billion for electricity when the reports the figure is based on said no such thing, says Electricity Commission chairman David Caygill.

Speaking to the Wellington Chamber of Commerce this morning, Caygill was constrained from commenting on the imminent report of the Ministerial Review of electricity market arrangements. The report is due to go to Cabinet next Monday or August 9.

But that didn't stop him, perhaps unintentionally, taking a poke at Energy Minister Gerry Brownlee's spin on the report on electricity prices for the Commerce Commission by a Californian electricity markets academic and regulator, Professor Frank Wolak.

The report found evidence that electricity companies exercised market power to drive up wholesale prices during periods of low hydro storage more than if the market had traded to a theoretical best practice benchmark.

Brownlee's office concocted the $4.3 billion figure from various parts of the Wolak report to give it political impact, a tactic that Caygill dismissed as "an overly literal mis-reading of the inevitable headline" from the Wolak and subsequent Commerce Commission reports on wholesale electricity market dynamics.

"I am concerned that the message of a complex and valuable report has been distorted. The reports (the Commerce Commission also wrote a report based on Wolak) simply do not say that consumers have been overcharged $4.3billion, or indeed any other specific figure," said Caygill, whose Electricity Commission is under threat because of the ministerial review.

His speech appeared to suggest limited involvement by the Commission in the Ministerial Review process and Caygill deliberately expressed now view about off most of the big current issues, except to lay out a workplan the Commission is pursuing to develop thinking on all of them.

However, he defended the Commission's record and gave a stirring commitment to finding "better, smarter, more appropriate forms of public regulation".

"That's what the sector needs, whatever its institutional form or detailed content. It's what the public deserves," said Caygill.

Despite criticism of its processes, the Commission had approved huge capital works on the national grid, which was adding $2.7 billion of new assets to its existing $2.5 billion asset base, said Caygill.

Businesswire.co.nz

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