About the New Zealand

Electricity Sector
 CONTENTS
3 PURPOSE
3 WHAT IS ELECTRICITY?
4 KEY ELEMENTS OF THE ELECTRICITY SECTOR
4 Generation
9 Transmission
9 Distribution
9 Retailers
9 Electricity consumers

12 HOW DOES THE ELECTRICITY SECTOR OPERATE?

12 Power system operation
12 Wholesale electricity market
13 Retail electricity market

14 INDUSTRY STRUCTURE AND PARTICIPANTS

14 Generation
15 Transmission
15 Distribution
17 Retailing

18 ROLE OF ELECTRICITY COMMISSION AND OTHER AGENCIES

20 INDUSTRY FACTS AND FIGURES
21 GLOSSARY

Cover Image. Wind turbines at Te Apiti wind farm, Tararua Ranges.

2 > ABOUT THE NZ ELECTRICITY SECTOR
> PURPOSE
This document provides an overview of the electricity sector in New Zealand. It looks at the
sector from three different viewpoints – what are the physical components, how does the
system work and who are the main participants.
It ends with a brief description of the Electricity Commission, and other agencies with key
roles in the electricity sector.

> WHAT IS ELECTRICITY?

Electricity is the flow of electrical energy or charge in a conductor such as copper
wire. It is a secondary energy source, which means we get it from the conversion
of other sources of energy such as gas, coal, wind and water.
The flow of electrical charge is known as electrical current. The force that is applied to the
electrons to make them flow is known as voltage. As an analogy, consider water flowing
through a pipe: the current is the rate of water flow, and the voltage is equivalent to the
pressure that is applied to make the water flow through the pipe.
xx Power is the rate at which electrical energy is produced or used
xx Power is measured in Watts (W), or more commonly, kilowatts (kW)
or megawatts (MW)
xx The amount of electricity used over a period of time is measured in kilowatt hours (kWh):
a 1 kW bar heater operating for one hour will use 1 kWh of electricity
xx New Zealand households use an average of about 9,000 kWh of electricity
per year.

Managing the national grid from Transpower’s Wellington control room. Photo courtesy of Transpower New Zealand Limited.

ELECTRICITY COMMISSION > 3

 > key elements of
the electricity sector
Figure 1: Key elements of the electricity sECTOR

The electricity system is made up of:

• Generation – the power stations (generators) that produce electricity;
• Transmission – the wires and cables (often called the national grid) that transport electricity at
high voltages from power stations to distribution networks and to the largest industrial users (called
direct consumers);
• Distribution – the local networks that carry electricity from the national grid to residential, commercial
and smaller industrial users. Some power stations (called embedded generators) are connected directly
into a distribution network rather than the national grid;
• Retailers – the participants that buy wholesale electricity and on-sell it to consumers at their individual
premises; and
• Consumers – nearly 2 million purchasers ranging from households to large industrial users.

Generation
New Zealand’s total generation capacity is currently around 9,100 MW, compared with daily peak
demand of about 6,500 MW.
More than half of New Zealand’s electricity is generated from hydro-electric stations. The remainder
comes from thermal, geothermal and wind power, with smaller amounts from other sources as shown
in Figure 2 and 3. Some industrial sites produce heat and electricity for industrial processes, in a process
known as cogeneration. Often excess cogenerated electricity is exported into the distribution network or
national grid.
Because New Zealand’s storage lakes can only hold enough water for a few weeks of winter energy
demand, hydro generation is sensitive to the level of inflows from rainfall and snowmelt. For this
reason, when inflows are low for a sustained period, alternatives such as coal must fill the place of
reduced hydro generation. In 2008, 52 percent of electricity was produced at hydro stations, 24 percent
by gas-fired power stations, 10.5 percent by coal-fired stations, 9.5 percent geothermal, 2.5 percent wind
power and 1.5 percent other sources. Hydro contribution has ranged between 52 percent and 65 percent
over the last five years. Figures 2 and 3 show how the generation mix has changed over time as demand
has increased.
A full list of New Zealand generation plants bigger than 10 MW is provided in Table 1. Figure 4 shows the
locations of the plant.

4 > ABOUT THE NZ ELECTRICITY SECTOR

Figure 2: Electricity Generation by fuel Type
GWh
40,000

35,000

30,000

25,000
Hydro
20,000
Geothermal
15,000 OTHER
OIL
10,000
Coal
5,000 GAS

0 COGENERATION
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: New Zealand Energy Data File 2009

Figure 3: total Electricity Generation Capacity by Plant Type (10MW or greater)

MW
10,000

9,000

8,000

7,000 Hydro
Geothermal
6,000
other
5,000
FUEL OIL
4,000
DIESEL
3,000 COAL/GAS
2,000 GAS
1,000 Gas/OIL

0 COGENERATION
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

Source: New Zealand Energy Data File 2009

There are a number of new generation technologies under development in New Zealand and
internationally. Tidal and wave power are examples of emergent technologies that might become
commercially viable in the future. Tidal power uses the predictable movement of tides to generate
electricity, whereas wave power uses the energy of ocean surface waves.
Each generation type has different characteristics, as summarised in Table 2. Because of these
differences, it is desirable to have a mix of plant types rather than rely entirely on one fuel source,
location or technology.

ELECTRICITY COMMISSION > 5

 Table 1: Information on Current, GRID-CONNECTED Generating Plants
(10 MW or Greater as at 30 JUNE 2009)1
Fuel Type Plant Name Owners/Operators2 Capacity (MW)
BIOMASS Kinleith Genesis Energy 40
COAL/GAS Huntly steam turbines (Units 1-4)3 Genesis Energy 970
DIESEL Whirinaki4 Crown (Contact Energy) 155
GAS Edgecumbe cogeneration Bay of Plenty Electricity (Todd Energy) 10
Huntly e3p (Unit 5) Genesis Energy 385
Huntly p40 (Unit 6) Genesis Energy 50
Kapuni cogeneration Bay of Plenty Electricity 25
Kawerau cogeneration Norske Skog Tasman 37
Kiwi Dairy cogeneration (Whareroa) Todd Energy 70
Otahuhu B Contact Energy 380
Southdown Mighty River Power 170
Taranaki Combined Cycle (TCC) Contact Energy 385
Te Rapa cogeneration Contact Energy 44
GEOTHERMAL Kawerau Mighty River Power 90
Mokai Tuaropaki Power Company (Mighty River Power) 112
Ngawha Top Energy 10
Ohaaki5 Contact Energy 50
Poihipi Rd Contact Energy 55
Rotokawa Mighty River Power 33
Wairakei Contact Energy 176
HYDRO Aniwhenua Bay of Plenty Electricity (Todd Energy) 25
Arapuni Mighty River Power 197
Aratiatia Mighty River Power 78
Atiamuri Mighty River Power 84
Aviemore Meridian Energy 220
Benmore Meridian Energy 540
Clyde Contact Energy 432
Cobb Trustpower 32
Coleridge Trustpower 45
Highbank Trustpower 25
Kaitawa Genesis Energy 36
Karapiro Mighty River Power 90
Lloyd Mandeno (Kaimai Scheme) Trustpower 16
Manapouri6 Meridian Energy 840
Mangahao Todd Energy 42
Maraetai Mighty River Power 360
Matahina Trustpower 72
Ohakuri Mighty River Power 112
Ohau A Meridian Energy 264
Ohau B Meridian Energy 212
Ohau C Meridian Energy 212
Paerau Trustpower 10
Patea Trustpower 31
Piripaua Genesis Energy 42
Rangipo Genesis Energy 120
Roxburgh Contact Energy 320
Ruahihi (Kaimai Scheme) Trustpower 20
Tekapo A Meridian Energy 25
Tekapo B Meridian Energy 160
Teviot Pioneer Generation (Trustpower) 11
Tokaanu Genesis Energy 240
Tuai Genesis Energy 60
Waipapa Mighty River Power 51
Waipori Trustpower 84
Waitaki Meridian Energy 105
Whakamaru Mighty River Power 100
Wheao and Flaxy Scheme Trustpower 24
WASTE HEAT Glenbrook Alinta ENZ 112
WIND Tararua Wind Farm Trustpower 161
Te Apiti Meridian Energy 90
West Wind7 Meridian Energy 143
White Hill Meridian Energy 58

1. List includes all stations greater than 10 MW.
2. Company names are listed without the suffixes ‘Limited’,
‘New Zealand Limited’ and ‘Co-operative Group Limited’
where applicable.
3. 1,000 MW is the maximum capacity if running fully on gas. Currently as
coal and gas the capacity is less by up to 40 MW.
4. Whirinaki is operated under direction from the Electricity Commission.
The plant is owned by the Crown with Contact Energy engaged to
operate and maintain the plant.
5. Ohaaki plant capacity has been derated from 104 MW to 50 MW.
6. Manapouri has a maximum capacity of 840 MW but cannot generate
this due to consent limits.
7. To be completed late 2009.

6 > ABOUT THE NZ ELECTRICITY SECTOR

Figure 4: LOCATION OF ELECTRICITY
GENERATORS IN New Zealand

Ngawha

Te Rapa
Kaimai Scheme
Karapiro
Edgecumbe
Kawerau
Arapuni
Southdown
Waipapa Kinleith Matahina
Otahuhu
Maraetai Atiamuri
Aniwhenua Glenbrook
Whakamaru Ohakuri
Wheao Huntly
Poihipi
See Inset
Mokai Ohaaki
Aratiatia Rotokawa
Wairakei
Kaitawa Tuai
Piripaua
Tokaanu

Rangipo

Taranaki CC
Whirinaki
Kapuni
Whareroa
Patea

Te Apiti
Tararua
Mangahao

Cobb
West Wind

TYPE OF GENERATION

HYDRO

Coleridge
GAS
Highbank

GEoTHERMAL
Tekapo A
Tekapo B
Ohau A
Ohau B Ohau C COAL
Benmore
Aviemore Waitaki

WIND
Clyde Paerau

Roxburgh OTHER
Manapouri Teviot
(Biomass/waste heat)
Waipori

Whitehill
Diesel

ELECTRICITY COMMISSION > 7

 Table 2: Generator types
Type of plant Energy source
Hydro Water pressure drives a
turbine connected to an
electricity generator
Geothermal Steam from deep
(e.g. Wairakei) underground is piped
to the surface to drive a
turbine connected to an
electricity generator
Wind Wind turns a large rotor
which is coupled to an
electricity generator
Gas- or coal- A boiler heated by
fired steam burning fossil fuel creates
plant steam, which drives a
(e.g. Huntly)
turbine connected to an
electricity generator
Combined Burning of gas is used
cycle gas to drive a turbine which
turbine
is connected to an
(CCGT) (e.g. electricity generator. Heat
Otahuhu CC)
from turbine exhaust is
used to create steam,
which is also coupled to
a generator to produce
electricity
Open cycle Burning of gas/distillate
turbine is used to drive a turbine
(e.g.
which is connected to an
Whirinaki) electricity generator
Biomass Burning of waste such
(e.g. Kinleith) as bark/sawdust is
used to create steam,
which drives a turbine
connected to an electricity
generator
8 > ABOUT THE NZ ELECTRICITY SECTOR
Characteristics
• Expensive to build, but low running cost
• Generation affected by inflows from rainfall/snowmelt
• Some environmental impact due to construction and/or
operation, but no greenhouse gas emissions from operation
• Location dictated by hydro resource availability
• Relatively high upfront cost but modest running cost
• All New Zealand geothermal sources produce some
greenhouse gases
• Must be located near source of underground heat or steam
• Expensive to build but low running cost
• Difficult to forecast output accurately and output may vary
from minute to minute, so fast-start generation is needed to
provide backup
• Construction and operation have some environmental impact
• No greenhouse gas emissions during operation
• Lower upfront cost than renewables, but more costly to run due
to ongoing fuel bill
• Less vulnerable to ‘forces of nature’ in short term – provided
fuel supply is secure
• Less efficient in fuel conversion than newer combined
cycle technology
• Emits greenhouse gases/other pollutants
• Upfront cost lower than renewables and most steam plant
• Higher fuel conversion efficiency than steam plant
• Less vulnerable to ‘forces of nature’ in short term – provided
fuel supply is secure
• Relatively small footprint provides locational flexibility
• Emits greenhouse gases
• Relatively low upfront cost
• Relatively low fuel conversion efficiency resulting in higher
variable operating cost
• Flexible to operate – can respond to system changes at
short notice
• Small footprint provides locational flexibility
• Emits greenhouse gases
• Relatively expensive to build
• Relatively low fuel cost if utilising low value waste (but can
require supplementation from gas/coal etc.)
• Location influenced by availability of fuel source (transport
cost can be significant for waste products)
• Modest greenhouse gas emissions (if main fuel source is
renewable)
Transmission
The national grid has approximately 12,000 km
of high voltage transmission lines. Most of the
grid operates on alternating current (the HVAC
system), although there is a direct current (HVDC)
link for long distance transfer of power between
Benmore in the lower South Island and Haywards
near Wellington. The HVDC link includes the set of
cables running under Cook Strait, and is sometimes
referred to as the ‘Cook Strait cable’. Figure 8
displays the New Zealand Transmission Network.
The national grid transports electricity from over
50 power stations, and connects with distribution
networks or major industrial users at around 200
grid exit points (GXPs) around New Zealand.
Because of New Zealand’s geography, the
transmission grid comprises a long trunk with
smaller side branches serving areas such Westland
and the Hawkes Bay. This structure means that
there are few alternate paths for electricity to flow
from source to destination, in contrast to many
overseas power systems, which provide multiple
paths between generators and demand centres.
This characteristic can be particularly important
when a transmission line outage occurs.
Another effect of New Zealand’s geography is that
there are often long distances between generation
and the main demand centres – especially for
hydro generation in the South Island. This results
in higher electrical losses on transmission lines.
Losses, which average about 3 percent (but can
be as much as 7 percent) of power transmitted,
occur because transmission lines have resistance,
causing some energy to be lost as heat.
As a remote island nation, New Zealand cannot
import electricity from or export electricity to
other countries, so must be entirely self-sufficient
in meeting its needs. In contrast, many other
countries that are interconnected to other nations
can import power if needed, such as in the event
of a dry hydro situation. They may also export
power, such as when there is excess hydro or wind
generation available which may otherwise
be wasted.
Distribution
There are two types of distribution networks,
local networks that are connected to the grid,
and secondary networks, such as within a
large shopping mall that are connected to a
local network.
Power pylons beside Desert Road.
Distribution networks transport power to
consumers through a network of overhead wires
and underground cables (generically referred to
as lines). In total, there are over 150,000 km of
distribution lines in New Zealand. The distribution
networks also include substations which convert
electricity to lower voltages.
Almost all consumer premises in New Zealand are
connected to a distribution network. There are also
some generators, known as embedded generators,
which are linked directly to distribution networks.
Retailers
Retailers buy electricity at connection points to
the grid and on-sell it to consumers at individual
customer connection points. The retailer is
responsible for the installation of appropriate
metering, meter reading, billing and payment
collection. The retailer pays distribution
companies for distribution service (which includes
transmission charges paid by distributors to
Transpower), and also buys electricity from the
wholesale electricity market. In most cases, the
consumer is billed only by the retailer.
Electricity consumers
Electricity consumers range from large industrial
sites down to individual households. Total
electricity consumption in New Zealand is about
40,000 gigawatt hours (GWh) per annum.
Electricity consumption has increased at
approximately 2 percent each year in recent years
and is strongly related to economic growth and
population size.
Demand for electricity varies from moment to
moment and supply must change to meet changes
in demand. Consumption follows strong daily
and seasonal patterns. At low demand times
such as a summer night, total demand may be as
low as 2,600 MW, whereas at peak times (winter
evenings) it can exceed 6,500 MW. While electricity
use has historically been highest on cold winter
evenings, some regions now have a summertime
peak demand as a result of increasing use of farm
irrigation and domestic air-conditioning. Figure 5
shows a ‘typical’ demand profile for a domestic
consumer for a 24-hour period during winter.
ELECTRICITY COMMISSION > 9
 FIGURE 5: typical RESIDENTIAL DAILY DEMAND PROFILE

DEMAND (KW)

00:00 04:00 08:00 12:00 16:00 20:00

TIME OF DAY

Electricity consumption by sector is shown in Figure 6. Industrial and commercial users account for two-
thirds of total demand, but only slightly more than 25 percent by customer numbers. This is because these
users have higher average consumption per customer. For example, the single largest user (the aluminium
smelter at Bluff) accounts for approximately 14 percent of New Zealand’s total electricity demand.

Figure 6: ELECTRICITY CONSUMPTION BY SECTOR

ESTIMATED ENERGY CONSUMPTION BY SECTOR (GWh) CUSTOMERS BY SECTOR
(38,545 GWh total in year ended Dec 2008) (total of 1,930,814 customers in the year ended Dec 2008)

Residential 32% Residential 86%

Commercial 24% Commercial 8%

Industrial 44%
Industrial 6%

Source: MED Energy Data File, 2009

Residential users make up about one-third of total consumption, with the majority of residential demand
being for water heating, space heating and lighting as shown in Figure 7.
Technological progress has an impact on electricity consumption as well as generation. There has been
growth in electricity-using technologies over time such as computers and air-conditioning, but there have
also been improvements in efficiency. For example, modern electric lighting, heating appliances and
motors are significantly more efficient than their predecessors. Improved electricity efficiency is expected
to play an increasingly important role in future security of supply and achieving sustainability objectives.

Figure 7: RESIDENTIAL ELECTRICITY USE

Percentage of residential energy consumption by end-use

Heating 19%
Misc 22%
Water heating 26% Dishwashers 1%

Lighting 12% Cooking 7%

Clothes dryer 2%
Refrigeration 8%
Towel rack 3%

Source: KEMA Electricity Efficiency Potentials Study, 2007

10 > ABOUT THE NZ ELECTRICITY SECTOR

FIGURE 8: Transmission NETWORK

Otahuhu

Huntly
Whakamaru

Stratford

Bunnythorpe

Kikiwa
Haywards

Islington
LINE CAPACITY

50 kV, 66 kV

110 kV

220 kV

350 kV (HVDC)

Benmore Substation

Tiwai

Source: Transpower New Zealand Limited

Note: A more detailed transmission map is available at www.gridnewzealand.co.nz/maps

ELECTRICITY COMMISSION > 11

 > How does the electricity
sector operate?
Power system operation
The Electricity Commission has a number of
functions to facilitate the effective day-to-day
operation of the power system and markets in
accordance with the Electricity Governance Rules
2003 (the Rules). The Commission appoints a
System Operator (Transpower NZ Ltd) with
responsibility under the Rules to co-ordinate The Electricity Commission’s Riskmeter sums up assessed risk of
electricity shortages in coming months.
supply and demand resources to maintain real-
time security.
Ensuring real-time security requires the System
Wholesale electricity market
Operator to schedule and dispatch electricity so Generators that are bigger than 30 MW or which
that a balance between electricity supply and are grid-connected compete in the electricity spot
demand is continuously maintained, and disruption market for the right to generate electricity to satisfy
of supply is avoided. It does this by instructing demand (subject to transmission capacity). They do
generators (dispatch instructions) when and how this by submitting ‘offers’ to the System Operator.
much electricity to generate so that injections Each offer covers a future half-hour period (called
of electricity into the system match off-take by a trading period) and is an offer to generate a
electricity consumers at each moment in time. specified quantity at that time in return for a
If balance is not maintained, power quality will specified payment.
deteriorate and generators could automatically The System Operator uses this price information to
disconnect from the power system, causing further rank offers in order of price, and selects the lowest
deterioration of power quality, and in extreme cost combination of resources to satisfy demand.
situations, blackouts for consumers. The highest priced generator actually required for
In addition to its real-time dispatch role, the System a given half hour sets the spot price for that trading
Operator role involves significant investigations period, and all generators are paid the spot price
and planning which occur over periods from years for their production. Electricity spot prices can vary
to minutes ahead of real-time. Examples of this significantly across trading periods and locations,
are co-ordination of generation and transmission reflecting factors such as changing demand (e.g.
outages, facilitating commissioning of new lower prices in summer when demand is subdued)
generating plant and procurement of ancillary and supply (e.g. higher prices when hydro lakes
services to support power system operation. and inflows are below average) and electrical
losses and constraints on the transmission system
The Electricity Commission has responsibility for
(e.g. higher prices in locations further from
monitoring security of supply. The Commission
generating stations).
carries out an Annual Security Assessment to
update the supply outlook over the next decade. In addition to retailers, a small number of
The Commission assesses factors such as planned customers, typically large industrial users, also
generation, transmission constraints, forecast buy electricity directly from the spot market.
growth in demand, and fuel stockpiles to determine These parties will typically also enter into financial
if additional reserve energy is required. contracts (often called ‘hedges’) which smooth out
some or all of the volatility in spot prices. The spot
The Commission also routinely monitors short-
and contracts markets are collectively called the
term security (the period up to 18 months ahead)
wholesale electricity market.
and provides industry with information on factors,
such as risks to hydro lake storage and changes in
electricity consumption patterns.
The Commission’s Riskmeter (http://supplyline.
electricitycommission.govt.nz/) sums up the
overall short-term security assessment, and
other information is regularly published by the
Commission’s service providers – in particular
COMIT Free-to-Air which provides up-to-date
spot prices, hydrological inflows, and fixed price
contract indices.

12 > ABOUT THE NZ ELECTRICITY SECTOR

Retail electricity market
Most consumers buy their power from an
electricity retailer, rather than in the wholesale
electricity market.
The Commission oversees the operation of the
electricity retail market in order to promote
strong retail competition and fairness for
consumers. The role includes providing
arrangements for protection of consumers, as
well as for administering retail market rules such
as metering arrangements, customer switching
and reconciliation – the process by which the
quantity of electricity purchased by each retailer is
calculated.
The key features of the Rules are that customers
can switch between retailers, and any party can be
Benmore Hydro Station on the Waitaki River. Photo courtesy of Meridian Energy limited.
an electricity retailer provided they meet minimum
requirements.
While the extent of retail competition varies across
the country, customers have a choice of retailers. In
some parts of New Zealand there are five or more
competing retailers. Furthermore, the switching
process has become easier over time, and can
generally now be done over the phone with the
new electricity retailer.
Consumer New Zealand provides a free
web-based tool to help residential users to
shop around. This tool is available at
www.powerswitch.org.nz and shows the electricity
retailers and tariff options available in each area.
It also allows users to calculate their expected bill
with different suppliers.
ELECTRICITY COMMISSION > 13
 > INDUSTRY STRUCTURE
AND PARTICIPANTS
Generation
The five major generation companies, listed in Table 3, produce more than 90 percent of
New Zealand’s electricity.
Table 3: Major Generating Companies

Contact Energy is a publicly listed generation and retail company with hydro, gas-fired and geothermal plant.
Contact Energy was created from the first split of ECNZ in 1996. www.contactenergy.co.nz

Genesis Energy is a state owned generation and retail company. Generation assets include hydro,
coal- and gas-fired and wind power. Genesis was created from the second split of ECNZ in 1998.
www.genesisenergy.co.nz

Meridian Energy is a state owned generation and retail company, which owns primarily hydro and wind
generation assets. Meridian was created from the second split of ECNZ in 1998.
www.meridianenergy.co.nz

Mighty River Power is a state owned generation and retail company with hydro, geothermal and cogeneration
plant. Mighty River Power was created from the second split of ECNZ in 1998.
www.mightyriverpower.co.nz

TrustPower is a publicly listed generation and retail company with hydro and wind generation plant.
www.trustpower.co.nz

The installed generation capacities of the five major generation companies, and the type of generating
plant they own (as at 2009) are shown in Figure 10.

Figure 10: GENERATION CAPACITY AND TYPE, BY GENERATING COMPANY (Largest fiVe only)
MW installed capacity

0 500 1,000 1,500 2,000 2,500 3,000

TrustPower
Coal/Gas
Mighty River Power Diesel
Gas
Meridian Energy
Gas/Wood/Coal
Genesis Power Geothermal
Hydro
Contact Energy
Wind

Source: MED Energy Data File 2009

In addition to the major generating companies, some electricity is generated by independently owned
hydro, geothermal, wind and cogeneration stations. Most generation injects directly into the national
grid; others, typically smaller stations, connect into distribution networks. A full list of grid-connected
generating stations over 10 MW in size is provided in Table 1.

14 > ABOUT THE NZ ELECTRICITY SECTOR

Transmission
The national grid is owned by Transpower, a state owned enterprise (www.transpower.co.nz).
In addition to managing the existing transmission system, Transpower plans and builds new grid
investments. These grid investments are first reviewed and approved by the Electricity Commission.
Transpower is responsible for all transmission development processes; for example, resource consents,
access rights and construction.

Distribution
The distribution companies that own the local distribution networks throughout New Zealand, are shown
in Figure 11. Although some of the largest distribution companies are publicly listed, most companies are
owned by local trusts or other local bodies.

Figure 11: New Zealand

distribution networks

Company 2
1 Top Energy
3
2 Northpower
3 United Networks 4
4 Vector 6
10
5 Horizon Energy Distribution 7
6 Counties Power 8
7 WEL Networks 5
8 Waipa Networks 9 11
9 The Lines Company
10 Powerco 12
11 Eastland Networks
10
12 Unison Networks 13
13 Centralines 14
14 Scanpower 15
16
15 Electra 29
16 Nelson Electricity 19
17 Marlborough Lines 18 17
18 Network Tasman
19 Buller Electricity
20 Westpower
21
21 Mainpower
20 22 22 Orion
23 Electricity Ashburton
23
24 Alpine Energy
24
25 Aurora Energy
26 The Power Company/ Electricity
25
28 Invercargill JV
27 27 OtagoNet
28 Network Waitaki
26 25 29 Wellington Electricity Lines Limited

26

ELECTRICITY COMMISSION > 15

 Lines companies range from very big to very small. One company, Vector, makes up about 26 percent
of the sector (by number of connections), and the four largest companies (Vector, Powerco, Wellington
Electricity Lines Limited and Orion) account for about 60 percent of connections.

Figure 12: NUMBER OF CONNECTIONS BY DISTRIBUTION COMPANY (OCTOBER 2008)

Vector
Powerco
Orion
Wellington Electricity Lines
Unison Networks
WEL Networks
Aurora Energy
Northpower
Electra
Counties Power
Network Tasman
DISTRIBUTION COMPANY

The Power Company

Mainpower NZ
Alpine Energy
Top Energy
Eastland Networks
Horizon Energy Distribution
Marlborough Lines
The Lines Company
Waipa Networks
Electricity Invercargill
Electricity Ashburton
OtagoNet
Westpower
Network Waitaki
Nelson Electricity
Centralines
Scanpower
Buller Electricity

0 50 100 150 200 250 300 350 400 450 500 550 600
NUMBER OF CONNECTIONS (000)

Source: Electricity Commission

Cycling through the Tararua Wind Farm on North Range Road.

16 > ABOUT THE NZ ELECTRICITY SECTOR

 Efficiency initiatives, such as the Electricity Commission’s RightLight programme, help reduce electricity bills for consumers and the need for more generation.

Retailing
All of the main generation companies in New Zealand are also electricity retailers. In addition, there are a
number of smaller independent electricity retail companies. The approximate market shares of retailers with
more than 10,000 customers are shown in Figure 13.

Figure 13: Market shares of major retailers (may 2009)

30

25
percent of market share

20

15

10

0
Contact Energy

Genesis Energy

Mercury Energy1

Meridian Energy2

TrustPower

Energy Online3

Bay of Plenty Electricity

King Country Energy

Bosco Connect

Auckland Gas Company

Powershop NZ

retailer
Source: Electricity Commission
1. Mercury Energy is a subsidiary of generator, Mighty River Power. 3. Energy Online is a subsidiary of Genesis Energy.
2. Note: Meridian Energy customer numbers include Comalco,
which accounts for about 14% of national electricity demand.

ELECTRICITY COMMISSION > 17

 > Role of Electricity
Commission and
other AGENCIES
The Electricity Commission is responsible for
overseeing New Zealand’s wholesale and retail
electricity markets, operating the electricity system,
promoting the efficient use of electricity and
regulating some aspects of electricity transmission.
The Commission is responsible for ensuring the
Rules which govern market and power system
operation remain efficient and relevant. An
example of why Rules may need to be amended
is to allow a new type of generator, e.g. wind, to
participate in the market.
New sources of generation can be developed
in New Zealand without needing any specific
approval from the Commission. The main
regulatory requirements are that new plant
conforms to the relevant technical codes in the
Rules and has the necessary resource consents.
The process for seeking resource consents is
governed by the Resource Management Act, and
is overseen by territorial local authorities.
The Commission monitors the level of investment
in new generation and the rate of demand growth.
It uses this information to compile and publish
projections of future supply and demand. If this
analysis indicates a deficit that is unlikely to be
filled by the normal operation of the market,
the Commission can enter into contracts to buy
reserve energy. These contracts can be for supply
from new or existing stations, or from electricity
users that agree to cut their demand in certain
circumstances (called demand response or
load control).
Substation at Kaiwharawhara, Wellington.
18 > ABOUT THE NZ ELECTRICITY SECTOR
The only reserve energy contract entered into since
the Commission was established in 2003 is for
generation from the diesel-fired Whirinaki station,
which is owned by the Crown.
The Commission promotes electricity efficiency,
including funding electricity efficiency initiatives.
It works closely with the Energy Efficiency and
Conservation Authority on these matters.
The Commission also regulates some aspects of
electricity transmission services. In particular, the
Electricity Commission:
• approves (or not) the grid investments
proposed by the transmission owner – since
transmission customers will be required to pay
for investments approved by the Commission;
• determines the contracting parties for
transmission services – these are currently
Transpower as provider, and generators, direct
consumers and distribution companies as
buyers; and
• approves the transmission pricing methodology
– which determines how total transmission
charges are divided up among the contracting
parties, and the basis for those charges such as
their share of peak usage.
Ohaaki Power Station, near Taupo.

Other government agencies

Several other agencies have important roles in relation to the electricity sector:

Ministry of Economic Development (www.med.govt.nz) MED is the Government’s policy advisor for the
energy sector, including the electricity sector. MED also has ownership responsibilities for the Whirinaki
electricity reserve generation plant. The Minister of Energy sets the Government Policy Statement which
sets out the Government’s expectations of the Electricity Commission.

Commerce Commission (www.comcom.govt.nz) In addition to its role as competition ‘watchdog’, the

Commerce Commission administers the price control regime applying to transmission and distribution
businesses, and enforces the legislation that requires a level of ownership separation between network
activities and generation/retailing.

Energy Efficiency and Conservation Authority (www.eeca.govt.nz) EECA promotes energy

efficiency, energy conservation and renewable energy. The Electricity Commission works closely
with EECA to design and implement programmes to promote and encourage the uptake of electricity
efficiency measures.

Ministry of Consumer Affairs (www.consumeraffairs.govt.nz) Part of the Ministry of Economic

Development, the Electricity Commission is required to consult with the Ministry of Consumer Affairs
on issues that impact small electricity consumers.

Ministry for the Environment (www.mfe.govt.nz) MfE advises and assists the Minister for the
Environment with his or her responsibilities under the Resource Management Act 1991. Existing and
new power stations need to meet the environmental requirements set out in this Act.

ELECTRICITY COMMISSION > 19

 > INDUSTRY FACTS
AND FIGURES
9,100 MW Total generating capacity of the New Zealand electricity system

Over 100 The number of power stations in New Zealand

About 1,400 The capacity of New Zealand’s largest power station, Genesis Energy’s gas- and coal-
MW fired station at Huntly

More than The capacity of New Zealand’s largest hydro power plant, Meridian Energy’s
700 MW Manapouri power station

Over 450 MW The expected total capacity of wind farms by the end of 2009.

1914 The year TrustPower’s hydro plant at Coleridge opened. It is the oldest operating
electricity generator in New Zealand

12,000 km The total length of the high voltage transmission lines that make up Transpower’s
national grid. They are supported by 40,000 supporting towers and poles

150,000 km The length of lines owned by local distribution companies, which take power from the
grid and deliver it to the end consumer

100,000 MWh The average amount of electricity New Zealand uses every day

About 40,000 The approximate amount of electricity New Zealand used in 2008, about the same as
GWh Hong Kong (approximately 7 million people) and only about 1% of the usage of the
United States

6,500 MW Approximate peak demand for electricity – usually occurs on cold, winter,
weekday evenings

About 2% per The average growth in national electricity consumption over the past decade
year

9,000 kWh The amount of electricity an average New Zealand household uses per year.
In 1974 an average household used 7,600 kWh

About 33% The percentage of total national electricity demand used by residential consumers.
Industrial consumers use about 45% and commercial customers about 22%

About 14% The percentage of total national electricity demand used by the Tiwai Point
aluminium smelter

63% The North Island’s share of total national electricity use

1.9 million The total number of electricity consumers in New Zealand, including householdes
and businesses

$5.5 billion The amount New Zealanders paid for electricity in 2007, of which about 75 percent
was on energy and about 25 percent on lines costs

20 > ABOUT THE NZ ELECTRICITY SECTOR

> GLOSSARY
Ancillary services – services needed to support the
transmission of electricity from generation plant
to consumer: black start, over-frequency reserve,
frequency-keeping reserve (also known as frequency
regulating service), instantaneous reserve and
voltage support.
Current – the flow (movement) of electric charge.
Demand response – where an electricity user
reduces consumption if supply is scarce, or in
response to a price signal and is rewarded by
a specific payment, or a lower cost of supply.
Direct consumer – an electricity user that takes
supply from the transmission grid (i.e. without using
a local distribution network).
Dispatch Instruction – an instruction from the
System Operator to a generator to generate power.
Distribution Networks – transport power to
end-use consumers through a network of
overhead wires and underground cables. The
distribution networks also include substations,
which convert electricity to lower voltages.
Almost all consumer premises in New Zealand
are connected to a distribution network. There
are two types of distribution networks: local
networks that are connected to the national grid,
and secondary networks (such as within a large
shopping mall) that are connected to a local
network. There are also some generators, known
as embedded generators, which are linked directly
to distribution networks. There are 29 distribution
companies that own the local distribution networks
in New Zealand.
Electricity Governance Rules and Regulations –
the Electricity Governance Regulations 2003 and
the Electricity Governance Rules 2003 (and any
subsequent changes to these) under which the
electricity market has operated since 1 March 2004.
Embedded generator – a generator that is connected
to a local or embedded network rather than to the
national grid.
Generator – a power station connected to
the national transmission grid or a local
distribution network.
HVAC – High Voltage Alternating Current.
HVDC – High Voltage Direct Current.
HVDC link – the high voltage transmission wires and
cables that can transport electricity in both directions
between Haywards in the North Island and Benmore
in the South Island (often referred to as the ‘Cook
Strait cable’).
Megawatt hour (MWh) – the amount of electricity
produced by a 1 MW power station operating for
one hour. There are 1,000 kilowatt hours (kWh) in
a megawatt hour.
National grid – the system of transmission lines,
substations and other works, including the HVDC
link used to connect grid injection points and
grid exit points to convey electricity throughout
New Zealand.
Power – the rate at which electrical energy is
produced or used, measured in watts.
Reserve energy – generation capacity or firm
demand response that can be contracted by the
Electricity Commission, if it considers that normal
market operation will not ensure adequate supply.
Retail market – the market where consumers
interface with industry participants for the delivery
of electricity.
Spot market – the market where electricity
being injected onto, and taken from, the national
grid is bought and sold – it operates in half-hour
trading periods.
Spot price – the price of electricity in the spot
market. Spot prices vary every half hour.
System Operator – the service provider to the
Electricity Commission responsible for scheduling
and dispatching electricity generators in real time
and avoiding fluctuations in frequency or disruption
of supply. Transpower is the System Operator.
Trading period – a period of 30 minutes ending on
each hour or 30 minutes past each hour.
Voltage – the difference in electrical charge between
two points in a circuit (expressed in volts) which
makes electrical charges flow through a closed
circuit.
Wattage values – measure of capacity or demand
Kilowatt kW = 1,000 W
Megawatt MW = 1,000,000 W
Gigawatt GW = 1,000,000,000 W
Wholesale electricity market – the combination
of the spot market and the associated financial
contracts (hedge) market where buyers and sellers
trade contracts that smooth out some or all of the
volatility in electricity spot prices.
Electricity Commission
Te Komihana Hiko
Level 7, ASB Bank Tower, 2 Hunter Street
PO Box 10041, Wellington 6143, New Zealand
Telephone + 64 4 460 8860
Facsimile + 64 4 460 8879

Electricity Commission
Te Komihana Hiko
www.electricitycommission.govt.nz