Auditor-General's overview

Electricity Commission: Review of the first five years.

In 2003, the Government established the Electricity Commission (the Commission) to provide better governance over the generation, supply, and use of electricity in keeping with the Government Policy Statement on Electricity Governance (Government Policy Statement).

The Electricity Act 1992 requires me to report on the performance of the Commission against the objectives, outcomes, and performance standards set out in the Government Policy Statement. An auditor that I appoint audits the Commission's performance each year as part of the audit of the Commission's financial statements.

Although the Commission has completed many tasks that are important to the ongoing functioning and development of the electricity market, it has had difficulty measuring its achievements against the Government Policy Statement's objectives and outcomes. This concern was reflected in the appointed auditor's audit opinions for the 2004/05 to 2006/07 financial years. Establishing the effect of their work is a difficulty experienced by many public entities (see my 2008 report, The Auditor-General's observations on the quality of performance reporting). Therefore, I decided that a more in-depth review of the Commission's progress in reporting its performance against the Government Policy Statement's objectives, outcomes, and performance standards was warranted.

I am pleased to note that the Commission identified four objectives in its Statement of Intent 2008-2011 that link its work to the principal objectives and specific outcomes in the Electricity Act 1992 and the objectives and outcomes in the Government Policy Statement. I am also pleased to note that the appointed auditor has noted in their 30 June 2008 opinion that the Commission's performance standards are appropriate, adequate, and accurate, and enabled an informed assessment to be made.

The Commission has aligned the electricity indicators and impact indicators with each of its objectives. The electricity indicators provide information on the state of the sector, and the impact indicators are intended to provide information on the difference that the Commission is making for the electricity sector. These are an improvement on the indicators that the Commission has used in the past.

The Commission included the electricity indicators in its Statement of Intent 2008 2011 and has provided the Minister of Energy with a report against both the electricity indicators and impact indicators up to 31 December 2008. The Commission intends to report on these indicators twice a year.

The Commission is continuing to refine and improve on its performance measurement framework. The four objectives have been refined to three objectives in the Statement of Intent 2009 2012.

I expect that it will take a couple of years before meaningful trends and information provided by the impact indicators will enable the Commission to assess the outcomes of its work and whether this work is enough. The Commission considers that there is strong evidence of positive outcomes from its work, and its challenge is to develop the arrangements, voluntary and regulatory, that allow commercial entities to deliver the desired outcomes. My Office will be watching the Commission's progress in assessing the effectiveness of its work in influencing outcomes.

Because of the difficulty the Commission has had measuring its achievements against its identified objectives and outcomes, I am not yet in a position to comment on whether the work that the Commission has completed during its first five years is enough, or on the effect that its work has had on the electricity market.

I note that the Commerce Commission's review of the electricity market and the current Ministerial review of electricity market performance are looking at these issues.

I would like to thank the Commission's staff for the assistance that they have provided to my staff during this review.


K B Brady
Controller and Auditor-General

16 June 2009

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