Part 4: Monitoring and reporting on performance and progress

Electricity Commission: Review of the first five years.

4.1
In this Part, we discuss how the Commission's progress and performance has been reported and monitored so far, by:

quarterly reports from the Commission to the Minister of Energy and the Ministry of Economic Development;
annual reports published by the Commission; and
environmental reports produced by the Parliamentary Commissioner for the Environment.

4.2
The Commission's progress against the Government Policy Statement's requirements is monitored quarterly by the Ministry of Economic Development and annually by the appointed auditor. The Parliamentary Commissioner for the Environment also examines each year the extent to which the Commission has met environmental objectives and outcomes in the Government Policy Statement.

4.3
The appointed auditor and the Parliamentary Commissioner for the Environment have expressed concerns in the past that the reported performance focuses on tasks completed, rather than the extent to which the objectives and outcomes of the Government Policy Statement have been achieved. However, no monitoring agency has reported concerns about the Commission's progress with the tasks specified in the Government Policy Statement.

Quarterly reports to the Minister of Energy and the Ministry of Economic Development

4.4
As mentioned above, the Government Policy Statement requires the Commission to report at least quarterly to the Minister of Energy on progress against the Government's expectations in the Government Policy Statement.

4.5
The Commission has produced detailed quarterly reports to the Minister of Energy setting out its progress against the Government Policy Statement requirements and outputs from its SOI.

4.6
The reports cover the period from the release of the 2004 Government Policy Statement and include changes as a result of the updates in 2006 and 2008.

4.7
The quarterly reports provide a detailed summary of what the Commission has done during the quarter. They provide:

an overview of the main issues and achievements for the quarter;
a list itemising consultation carried out and rule changes completed in the quarter;
a year-to-date report against outputs in the SOI; and
a progress-to-date report on achievements against the Government Policy Statement.

4.8
A copy of the quarterly report is given to the Ministry of Economic Development, which is responsible for monitoring and evaluating the Commission's outputs and performance results. The Ministry of Economic Development's monitoring covers the Commission's:

capability;
work outputs;
progress against the Government Policy Statement requirements;
performance measures;
financial management; and
relationships with external stakeholders.

4.9
The Ministry of Economic Development prepares quarterly¹ performance monitoring and evaluation reports, which it sends to the Minister of Energy.

4.10
The Ministry of Economic Development's quarterly reports to the Minister of Energy include a copy of the Commission's quarterly report as well as:

commentary on the "key achievements" for the quarter under each output class;
the reasons why any tasks are not progressing according to the schedule, and whether the Ministry of Economic Development considers the Commission's explanation to be adequate;
commentary on the Commission's performance against its management and capability performance measures in its SOI; and
the Commission's financial performance against budget, including any reason for variances and whether the Ministry of Economic Development has any concerns about the statement of financial position.

4.11
The quarterly reports also contain a section on the Government Policy Statement. The Ministry of Economic Development's conclusion on this section for the 2008 reports was:

The Ministry is satisfied that [Government Policy Statement] requirements are being progressed.

Annual reports published by the Electricity Commission

4.12
The Commission includes in its annual reports:

a statement of service performance report against its performance measures (as required by the Crown Entities Act 2004); and
a description of its achievement against the outcomes and objectives in the Government Policy Statement (as required by the Electricity Act 1992).

4.13
The annual reports for 2004/05 and 2005/06 included separate statement of service performance and Government Policy Statement reports. A combined statement of service performance and Government Policy Statement report was produced for the 2006/07 annual report. The Commission combined the reports because the targets and measures in its statement of service performance have to align with the objectives and outcomes in the Government Policy Statement.

4.14
However, in 2007/08, the Commission returned to providing separate statement of service performance and Government Policy Statement reports, largely as a result of feedback from the appointed auditor who expressed concern about meeting the specific reporting and audit requirements of section 172ZM and section 172ZO respectively of the Act. The appointed auditor considered that separate reporting in the annual report would meet the Act's requirements more clearly.

Comments in audit opinions about the Commission's annual reports

4.15
As required by section 172ZO of the Act, the Auditor-General must:

examine the information included in the annual report, and provided to the Auditor-General, under section 172ZM; and
either report on it -
1. in the audit report provided to the Commission under section 156 of the Crown Entities Act 2004; or
2. despite that section, to the Minister and the House of Representatives as soon as practicable after receiving the information.

4.16
The appointed auditor's report must provide assurance on:

the appropriateness, adequacy, and accuracy of the information contained, or to be contained, in the annual report under section 172ZM; and
whether the information included in the annual report under that section enables, or is likely to enable, an informed assessment to be made of the matters stated in that section.

4.17
The appointed auditor audits the Commission's reported performance against the Government Policy Statement objectives and outcomes and the performance standards in its SOI. The audit opinions for 2004/05 and 2005/06 reported that the Commission had accurately reflected its achievements against the objectives and outcomes in the Government Policy Statement and against the performance standards in the SOI. However, they noted that the performance standards were largely task-oriented and short term in focus. The opinions went on to state:

We expect the Electricity Commission to move towards more outcome based reporting in future periods to demonstrate achievement of [the Government Policy Statement's] objectives and outcomes.

4.18
In the audit opinion for the year ended 30 June 2007, while commenting on the proposed performance standards in the statement of service performance,² the appointed auditor noted that the standards were heavily focused on transmission and security of supply. The appointed auditor expected that the Commission would move towards a similar degree of focus on the other Government Policy Statement objectives in future years. The appointed auditor also noted that:

...there was a need to enhance the provision of meaningful measures relating to outcomes to assist in assessing the performance of the Commission.

4.19
The Commission has taken action to address the appointed auditor's comments by preparing its own objectives that link its work to the principal objectives and specific outcomes in the Act, and to the requirements of the Government Policy Statement. The Commission has also identified "impact indicators" for each objective, aimed at providing information on the difference that the Commission is making for the electricity sector. We discuss the objectives and impact indicators further in Part 6.

4.20
This additional reporting has resolved the issues noted by the appointed auditor. The audit opinion for the year ended 30 June 2008 noted that:

... the information on the performance of the Commission against the [Government Policy Statement] objectives and outcomes and the performance standards in the Statement of Intent is appropriate, adequate and accurate, and enables an informed assessment to be made of those matters.

Reports by the Parliamentary Commissioner for the Environment

4.21
The Act requires the Parliamentary Commissioner for the Environment to annually examine the extent to which the Commission has met the Government Policy Statement objectives and outcomes concerning the environment.

4.22
The Parliamentary Commissioner for the Environment has reported four times. The first two reports³ focused on the wider electricity sector's environmental performance, because not all the environmental outcomes in the electricity sector could be attributed to the Commission.

4.23
The third report focused on the Commission's contribution to improved environmental management in New Zealand. It noted that many of the objectives and outcomes contained in the Government Policy Statement that relate to environmental outcomes are defined at a high level and that measuring performance is difficult.

4.24
The Parliamentary Commissioner for the Environment also reported that, while the Commission had been able to show that it is making progress on a number of activities relating to the Government Policy Statement objectives and outcomes, it was unclear how much effect some of the activities had had. This was a result of:

timing, in that it was too early to assess the effectiveness of the environmental programmes; and
lack of data or poor quality data in the electricity sector, especially about electricity consumption.

4.25
While the Parliamentary Commissioner for the Environment noted that much of this was outside the Commission's responsibility, the Commissioner also noted that if the Commission focused on demand-side information this would address, in part, the lack of data.

4.26
The most recent report looked at particular issues relevant to the year under review, rather than carrying out a systematic audit of the Commission's environmental performance.

4.27
The Commission was commended for having carried out a considerable amount of work developing programmes to improve the efficiency of electricity use by households, businesses, and industry.

4.28
The most recent report also raised questions about the scope of the Commission's role in improving electricity efficiency. The report raised the issue of evolving the Commission into an Energy Commission as well as increasing its statutory powers.

4.29
The most recent report also noted that goals in the Government Policy Statement were in conflict. That is, the goal of economic efficiency was in conflict with the goal of reducing greenhouse gases. The report noted that the Government Policy Statement should be amended to include guidance on how to reconcile these conflicts.

1: The Ministry of Economic Development's plan for monitoring the Commission says that the Ministry will provide quarterly and annual performance monitoring and evaluation reports. In practice, the reports are produced quarterly.

2: Under section 172ZL of the Act, the Minister of Energy is required to consult the appointed auditor about the proposed performance standards included in the Commission's SOI.

3: The first report covered the period 1 March to 30 June 2004. The second report covered the period 1 July 2004 to 30 June 2005.

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