Part 1: Introduction

1.1
In this Part, we describe:

• the purpose and structure of this report;
• the Electricity Commission (the Commission); and
• how we carried out our review of the Commission's first five years.

Purpose of this report

1.2
In this report, we present a review of the Commission. Our audit work over a number of years and reports by the Parliamentary Commissioner for the Environment have identified concerns about how the Commission measures and reports its performance against high-level objectives and outcomes.

1.3
We are also aware that the Commission has been criticised in the media and by politicians for problems within the electricity sector, including problems with the security of the supply of electricity. A concern about the security of electricity supply was one of the reasons why the Government of the day established the Commission, replacing the self-regulating arrangements previously in place. We consider that a review of the Commission will provide a useful status report for all those with an interest in the electricity sector and the country's energy needs.

1.4
We will continue to monitor the Commission's progress, and intend to carry out a performance audit when there are data available to measure the Commission's performance.

Structure of this report

1.5
Part 2 of this report describes the situation in the electricity sector before 2003. Part 3 describes the Commission's objectives and accountabilities. Part 4 discusses monitoring of the Commission. Part 5 describes the Commission's achievements, and Part 6 discusses the Commission's new planning and reporting framework. The Appendix provides an overview of the electricity sector, describing the physical system and the various markets.

The Electricity Commission

1.6
The Commission was established in May 2003 and began operating in September 2003. The Commission has to achieve the objectives and outcomes set out by the Minister of Energy in the Government Policy Statement on Electricity Governance (the Government Policy Statement).¹

1.7
The Commission is a Crown entity. It oversees and regulates the electricity industry in New Zealand the generation of electricity, its transmission through the national grid, its distribution through local electricity lines companies, and the markets in which electricity is bought and sold to consumers.

How we carried out our review

1.8
We interviewed staff from the Commission, staff from the Ministry of Economic Development, the appointed auditors who had conducted the statutory annual audits since 2003, and the Parliamentary Commissioner for the Environment.

1.9
We analysed the progress reported by the Commission in each of its annual reports against each Government Policy Statement requirement, to establish what work the Commission had done to address the requirements. We also reviewed the reports issued by the Parliamentary Commissioner for the Environment and the Ministry of Economic Development.

1.10
We obtained plans and reports on progress, and on important initiatives that the Commission has implemented.

1: The Government Policy Statement on Electricity Governance is referred to as the "GPS" or the "Government Policy Statement" in the Electricity Act 1992, and in documents produced by the Electricity Commission, the Ministry of Economic Development, and other electricity industry participants. In this report, we use the term "Government Policy Statement".