Decentralization and Re-centralization of Electricity Industry Governance in New Zealand

Abstract

For much of the twentieth century electricity generation and transmission in New Zealand was dominated by centralized state ownership and control, with local authority ownership of distribution and retailing. Radical reform of the sector commenced in the early 1980s, with the progressive corporatisation and unbundling of these sub-sectors, limited privatizations, and a shift towards light-handed non-industry specific regulation. These reforms contained inherent tensions that quickly manifested themselves in a political stand-off over the electricity price path required to support new generation investment. In turn this standoff spurred the industry-led development of a voluntary, self-governing wholesale electricity market. With a change of government in 1999 increasing re-centralization of industry governance and regulation resulted, in part justified on the grounds of winter power crises in 2001 and 2003 involving significant wholesale electricity price spikes (although blackouts were a regular and more disruptive occurrence prior to the reforms). With the return to centralized industry governance and shift towards heavy-handed regulation - but now with greater private sector investment in the sector - system supply and security issues persist, and questions remain over the likely effect of these policy reversals on required new investment.