Our plan for 1 July 2015–30 June 2016 Statement of Performance Expectations

Table of contents


Our Statement of Performance Expectations (SPE) outlines the Electricity Authority’s (the Authority’s) plan for the 2015/16 financial year. It includes information about our key projects and outputs, as well as our forecast financial statements.

The Authority was established in November 2010. Our early focus was on projects to ensure the reliability of New Zealand’s electricity sector. Our priority then moved to improving retail competition, and this remains a focus for the 2015/16 year. This year we are also increasing our focus on the efficient operation of the electricity industry. This work includes the transmission pricing review and initiatives relating to distribution networks. We will also take a wider look at ensuring the market provides efficient price signals and how we can encourage more consumer participation.

This SPE has been informed by the submissions we received on our 2015/16 appropriations and work programme consultation. It outlines how we plan to use each of our appropriations and what we are aiming to achieve.

The SPE is a partner document to our Statement of Intent 2014–2018 (SOI) published in June 2014. The SOI sets out our long-term strategic intentions for a four-year period while the SPE details our planned work and financial forecasts for one year.


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Dr Brent Layton

Statement of responsibility

The Crown Entities Act 2004 requires the Electricity Authority to prepare a Statement of Performance Expectations, including prospective financial and non-financial information, before the start of each year, to promote our accountability to the public. The prospective financial and non-financial information may not be appropriate for any other purpose and is unaudited.

We acknowledge responsibility for the preparation of the prospective financial and non-financial performance statements included in this Statement of Performance Expectations for 1 July 2015–30 June 2016. This includes the appropriateness of the assumptions underlying the prospective financial statements and all other required disclosures, pursuant to the Crown Entities Act 2004.

We acknowledge the responsibility for establishing and maintaining a system of internal control designed to provide reasonable assurance as to the integrity and reliability of the Authority’s performance and financial reporting.

In our opinion, the prospective statements fairly reflect the forecast financial position of the Authority at 30 June 2016, and results of our financial and service performance for the period ending on that date. We therefore authorise the issue of the prospective statements.


blayton sig rsowry sig


Dr Brent Layton                                 Hon Roger Sowry 

Chair                                                 Member 

4 June 2015                                      4 June 2015






Our strategic intentions

The Authority was established on 1 November 2010 to promote competition in, reliable supply by and the efficient operation of the electricity industry for the long-term benefit of consumers.

Our strategic intentions and strategic framework are outlined in detail in our Statement of Intent 2014–2018, and are summarised in Figure 1. 

Our strategic journey

The Authority was established on 1 November 2010 to promote competition in, reliable supply by and the efficient operation of the electricity industry for the long-term benefit of consumers.

Our strategic focus has developed during the relatively short life of the Authority to reflect progress in developing the electricity sector.

Phase 1: November 2010–November 2011

Our initial focus was on completing and implementing the changes required by section 42 of the Electricity Industry Act 2010 (the Act). This phase included a strong focus on improving reliability of supply and on initiatives to enhance retail market competition. A notable success was the creation of the What’s My Number campaign which had an immediate and ongoing impact.

Phase 2: November 2011–June 2013

In this phase our focus on retail competition intensified. Significant initiatives focused on wholesale market development to make it easier for new electricity retailers to enter and expand and existing retailers to offer their services more actively over a wider area.

Phase 3: June 2013–2015

More recently we have put emphasis on initiatives to enhance retail competition by enhancing consumer participation. This has included projects to improve the transparency of electricity charges and to make it easier for consumers to confidently find the best deal in the market.

Phase 4: 2015/16 and beyond

Retail competition remains our top priority but we are also increasing our focus on the efficient operation of the electricity industry including completing and implementing the transmission pricing review and initiatives relating to distribution networks. We will also take a wider look at ensuring the market provides efficient price signals.

How we are funded

We are funded by the Crown from three appropriations within Vote Business, Science and Innovation:

  • Electricity industry governance and market operations
  • Security management
  • Electricity litigation fund.

This SPE provides prospective information for each appropriation on the services that will be provided, the results to be achieved, and the costs of delivering these.

The Crown is reimbursed through a levy

The Crown is reimbursed for the cost of funding the Authority through a levy on industry participants. This levy also funds electricity efficiency programmes delivered by the Energy Efficiency and Conservation Authority (EECA).

We administer the collection of the levy on behalf of the Crown in accordance with the requirements set out in the Electricity Industry (Levy of Industry Participants) Regulations 2010.

Each year the Authority makes a request to the Minister of Energy and Resources seeking an appropriation of public money. Prior to making this request we consult on the proposed appropriation levels with those affected by the levy, and the outcome of this consultation is reported to the Minister at the time the request is submitted.

For each financial year the Crown recovers levy revenue up to the level of actual expenditure incurred against appropriations. Any over-recovery of levy revenue is refunded to levy payers.

About the levy

Changes we want to bring about

To achieve our strategic intentions, we are working across six broad strategies. The strategies are outlined below, along with the impact measures we will use to track progress. These impact measures were set out in our Statement of Intent 2014–2018 and have been reviewed for 2015/16.

We measure these impacts through both statistical analysis and qualitative assessments. We also undertake post-implementation reviews once development initiatives have been in place long enough to have had a measurable impact. We report on results against these impact measures in our annual report.

1. Reducing barriers

Our reducing barriers strategy involves facilitating the entry, expansion and exit of parties in electricity markets. In 2015/16 our focus is on ensuring that regulatory frameworks support market entry, exit, innovation and technological change such as electric vehicles, and also on making data and information available to assist informed investment and electricity consumption decisions. The key projects here focus on enhancing the performance of the hedge and spot electricity markets.

2. Facilitating consumer participation

Our facilitating consumer participation strategy involves making it easier for consumers to choose the electricity supplier and tariff that is right for them and ultimately increase demand-side participation in electricity markets. In 2015/16 we will focus on making it easier for consumers to access and share data about their electricity consumption (retail data project) and make it easier for them to find the best price and service offering (including the What’s My Number). This work will facilitate greater demand-side participation in electricity markets.

3. Providing efficient price signals

Our providing efficient price signals strategy helps inform the investment and consumption decisions of industry participants and consumers. In 2015/16 we will increase our focus on promoting efficient prices for electricity services. We will achieve this through our work on transmission and distribution pricing where the focus is on ensuring these prices are more reflective of costs and consumer benefits. We are also working to establish markets (where efficient and practicable) and disseminating price data and information.

4. Ensuring fit-for-purpose market services

Our ensuring fit-for-purpose market services strategy supports the efficient and effective operation of the wholesale and retail electricity markets. We work with our market operations service providers and the system operator, to provide services and systems that:

  • increase market efficiency through enabling interoperability to participant systems, adapting to changes in IT technology and automating transaction processes
  • ensure effective market operation through appropriate system reliability and resilience
  • facilitate market development through the use of flexible and scalable systems.

In 2015/16 we will be focussing on renegotiation of the system operator service provider agreement (SOSPA), bringing appropriate commercial arrangements to this monopoly service. We also expect to implement the results of the 2014/15 tender for market operations service providers and tender the registry service. During the year we will also be implementing the national market for instantaneous reserves and extended reserves.

5. Promoting flexibility and resilience

Our promoting flexibility and resilience strategy aims to ensure the electricity sector is able to respond efficiently to changing market circumstances (including emerging disruptive technologies like solar and electric vehicles) and to efficiently respond to unexpected events affecting the market.

In 2015/16 work in this area will focus on improving the capture and distribution of price and non-price data and information to help facilitate broad participation in electricity markets and to help facilitate efficient responses to changing market circumstances.

6. Increasing compliance

Our compliance strategy plays an integral role in ensuring the integrity of the electricity market. We take a risk-based and proportionate approach to compliance, recognising that most industry participants want to comply with their regulatory obligations voluntarily, or can be encouraged or induced to do so. Our focus is on facilitating voluntary compliance by providing information, education, encouragement and assistance. Serious compliance matters are formally investigated and may be subject to enforcement action.

In 2015/16 we will continue to seek improvements in our business-as-usual compliance functions.

Our services: the things we do

To realise our strategies, we undertake a range of project and business-as-usual activity. The high-level details of what we plan to achieve in 2015/16 and how we’ll assess this, are outlined below.

Electricity industry governance and market operations appropriation

The Electricity industry governance and market operations appropriation covers our statutory functions under the Electricity Industry Act 2010. This appropriation includes our four main services, as outlined below.

1. Market development

Our market development work focuses on promoting the competitive, reliable and efficient operation of the electricity system and markets. The key tools at our disposal to develop the market are making amendments to the Electricity Industry Participation Code (Code) and market facilitation measures.

2. Monitoring, information and education 

Our work in this includes market monitoring, and improving the availability of data, information and tools and improving awareness and understanding of how electricity markets function. We may also undertake reviews of anomalous events or reviews as requested by the Minister under section 18 of the Act. We also undertake promotion, information provision and education outreach targeted to both consumers and industry participants. This work aims to help improve understanding and engagement in the electricity market. 

3. Market services

We are responsible for the day-to-day (real-time) efficient and reliable operation of the electricity system and markets. Our work includes managing and monitoring the service provider contracts and carrying out a range of day-to-day operational functions. 

This output also includes implementation of Code amendments and market facilitation measures (MFM), in particular where this involves changes to the system operator or market operations service providers’ (MOSP) systems and processes.

4. Compliance

We are responsible for monitoring, investigating and enforcing compliance with the Act, regulations made under the Act, and the Code. We are increasing our pro-active compliance monitoring to ensure the Act, regulations, and the Code are accurately and consistently applied.

Appropriation and cost breakdown 

The above table includes the amount approved in the Government’s Estimates of appropriations for 2015/16 of $76.974 million; representing the maximum expenditure that can be incurred. For 2015/16 we are forecasting expenditure of $76.7 million will be required to deliver the desired results and service performance. The Authority is intending to hold its own expenditure at last year’s level, at $18.7 million. The table below provides a breakdown of the components of this forecast expenditure.

Security management appropriation

Security management is a multi-year appropriation for the period 1 July 2012 to 30 June 2017, to achieve enhanced security of supply in the electricity system during periods of emerging or actual security situations. The Authority is responsible for approvals in respect to use of this appropriation.

The system operator is responsible for on-going security monitoring and emergency management.

Electricity litigation fund appropriation

This appropriation is limited to ensuring that the regulatory body for the electricity industry is able to participate in litigation effectively and without delay. This includes taking prosecutions in accordance with our powers under the Electricity Industry Act 2010.

Writing quality standards

We have a writing quality standard that applies to all reports and publications. Performance is measured using external review of a sample of reports and publications.

How we work: Capability focus areas

Our vision is to be a world-class electricity regulator, delivering long-term benefits for consumers and contributing to the New Zealand economy.

Our stakeholders

Strong, professional and ongoing relationships with consumers and stakeholders are vital to assist us to develop effective improvements to the New Zealand electricity market. Our foundation document provided information about how we interpret our statutory objective, consult, develop Code and market facilitation measures and how we work with advisory groups.

Our people

We value our people and strive to provide a workplace and culture that is open and supportive. Our work standards are high, in keeping with the magnitude of the issues we are addressing.

Our processes

We strive to ensure our systems, tools and processes are in line with international best practice. We aim for improved efficiency, productivity and quality.

Financial information

This part of the SPE is the forecast financial statements required by section 149G of the Crown Entities Act 2004.

Prospective financial statements

The purpose of these financial statements is to provide a base against which the Authority’s actual financial performance can be assessed to promote public accountability.

These prospective financial statements are prepared for the purpose described above, and the information may not be appropriate for any other purpose. Actual financial results achieved for the period covered may vary from the information presented, and the variations may be material. The information in the prospective financial statements is unaudited.

These prospective financial statements have been prepared in accordance with Public Benefit Entity Financial Reporting Standard 42 Prospective Financial Statements.

There is no intention to update the prospective financial statements subsequent to presentation.

Reporting entity

The reporting entity is the Electricity Authority, which is an independent Crown entity in terms of the Crown Entities Act 2004 and the Public Finance Act 1989. The Authority was established under the Electricity Industry Act 2010.

The Authority is a Tier 1 public benefit entity, as defined under the External Reporting Board Accounting Standards Framework, and a reporting entity for the purposes of the Financial Reporting Act 1993, the Public Finance Act 1989 and the Crown Entities Act 2004.

Statement of compliance and basis of preparation

These prospective financial statements have been prepared in accordance with the requirements of the applicable International Public Sector Accounting Standards.

The financial statements are presented in New Zealand dollars rounded to the nearest thousand.

The accounting policies below have been applied consistently to all periods presented in the financial statements.

The financial information presented for the 2013/14 year reflects the actual results for that year. The financial information presented for the 2014/15 and 2015/16 years reflects the budgeted results for these years, and therefore does not include actual transactions and events.

Statement of significant assumptions

These prospective financial statements have been compiled on the basis of government policies and legislation at the time the statements were finalised.

The prospective financial statements are consistent with the delivery of strategies and impacts disclosed in this SPE and the programme of work the Authority expects to undertake during the forecast period.

A conservative view has been adopted with the assumption that funding will remain at the currently appropriated levels over the forecast period of these statements.

Budget expenditure is based on the assumption that the cost of certain inputs will increase in line with general inflation, while others will decrease as cost saving measures are implemented.

The prospective financial statements have been prepared using the most appropriate assumptions at the time the statements were prepared. As the statements are prospective in nature, actual results will vary from those presented in this SPE.

Factors that may lead to material differences between the prospective financial statements and the subsequent actual financial results reported include:

  • The outcome of the re-negotiation of the SOSPA. The prospective financial statements assume that system operator costs will be in line with those payable under the existing agreement. 
  • The outcome of the retender of four market operations service provider roles. The existing contractual arrangements for the clearing manager, wholesale information and trading system provider, pricing manager, and reconciliation manager roles end on 30 April 2016. The Authority released the request for proposal (RFP) for these services in March 2015. The tender closes on 25 May 2015, and the Authority will make decisions on the future contractual arrangements in early 2015/16. The prospective financial statements assume that the costs of these roles from May to June 2016 will be at the same level as payable under the existing contracts expiring 30 April 2016. The prospective financial statements also assume the system assets associated with these services have a useful life, for amortisation purposes, ending 30 April 2016. 
  • The implementation of the extended reserves manager role. This role is expected to become operational in 2016/17. During the 2015/16 year work will be undertaken to implement this new role, and the prospective financial statements assume these costs will be funded from within the Authority’s work programme budget. At the time the prospective financial statements were prepared, the Authority was in contractual negotiations with the extended reserves manager service provider, and therefore the actual costs associated with the implementation may vary from those assumed in the prospective financial statements. The Authority may incur additional costs from other service providers as a result of implementing this role, and the amount and presentation of the actual costs may be different from those assumed in the prospective financial statements.

Notes to the financial statements

Statement of significant accounting policies

(a) Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to New Zealand dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of comprehensive revenue and expense.

(b) Property, plant and equipment
Classes of property, plant and equipment

The major classes of property, plant and equipment are:

  • leasehold improvements
  • computer hardware
  • furniture and fittings
  • office equipment.
Owned assets

Items of property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses. Where material parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Disposal of property, plant and equipment

Where an item of property, plant and equipment is disposed of, the gain or loss recognised in the statement of comprehensive revenue and expense is calculated as the difference between the net sale price and the carrying amount of the asset.

Subsequent costs

Subsequent costs are added to the carrying amount of an item of property, plant and equipment when that cost is incurred if it is probable that future economic benefits embodied in the item will flow to the Authority. All other costs are recognised in the statement of comprehensive revenue and expense as an expense as incurred.


Depreciation is charged to the statement of comprehensive revenue and expense using the straight-line method at rates that will write off the cost of the assets, less their estimated residual values, over their useful lives. The estimated useful lives of major classes of assets and resulting rates are as follows:

The cost of leasehold improvements is capitalised and depreciated over the unexpired period of the lease. All assets are assumed to have no residual value. Capital work in progress is recognised as costs are incurred and not depreciated until the asset is completed and fully operational.

(c) Intangible assets

Software applications acquired by the Authority are stated at cost, less accumulated amortisation and impairment losses.

Subsequent expenditure

Subsequent expenditure on intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.


Amortisation is charged to the statement of comprehensive income on a straight-line basis over the estimated useful lives of intangible assets.

(d) Receivables and prepayments

Receivables and prepayments are stated at cost, less impairment losses. Bad debts are written off during the period in which they are identified.

(e) Cash and cash equivalents

Cash and cash equivalents comprise cash balances, deposits held on call and short-term investments with maturities of normally three months or less.

(f) Impairment

The carrying amounts of the Authority’s assets are reviewed at each balance date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount for the asset is estimated. The estimated recoverable amount is the greater of the fair value for the asset, less costs to sell and value in use.

If the estimated recoverable amount of an asset is less than its carrying amount, the asset is written down to its estimated recoverable amount and an impairment loss is recognised in the statement of comprehensive revenue and expense.

(g) Employee benefits

Employee entitlements include accrued salaries and bonuses, contributions to superannuation schemes, annual leave earned but not yet taken and liabilities for sick leave and long-service leave.

Superannuation schemes

Obligations for contributions to KiwiSaver and the State Sector Retirement Savings Scheme are accounted for as defined contribution schemes and are recognised as incurred.

Long-service leave

A liability for long-service leave has been calculated on an actuarial basis based on years of service, years to entitlement, the likelihood that staff will reach the point of entitlement and contractual entitlement information.

Presentation of employee entitlements

Accrued salaries and bonuses, sick leave, annual leave, vested long-service leave and non-vested long-service leave expected to be settled within 12 months of balance date are classified as current liabilities. All other employee entitlements are classified as non-current liabilities.

(h) Provisions

A provision is recognised when the Authority has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.

(i) Payables and accruals

Payables and accruals are stated at cost.

(j) Income tax

The Authority is a public authority under the Income Tax Act 2007 and is exempt from income tax.

(k) Goods and services tax

All amounts are shown exclusive of goods and services tax (GST), except for receivables and payables, which are stated inclusive of GST. Where GST is not recoverable as an input tax, it is recognised as part of the related asset or expense.

(l) Revenue
Crown revenue

The Authority is funded by appropriations from Parliament that cover the range of outputs the Authority provides to the Crown. Revenue from appropriations is recognised when matched by expenditure in the period in which it is incurred.

The Crown is fully reimbursed for appropriation funding provided to the Authority by levies collected from industry participants. The levies are paid directly to the Crown and do not appear as revenue to the Authority.

Interest income

Interest income is recognised in the statement of comprehensive revenue and expense as it accrues, using the effective interest method.

(m) Expenses
Operating lease payments

Payments made under operating leases are recognised in the statement of comprehensive revenue and expense on a straight-line basis over the term of the lease.

Changes in accounting policies

There have been no changes to accounting policies.

Glossary and abbreviations

Service providers

The system operator is responsible for the real-time operation of the power system, including scheduling and dispatching electricity, in a manner that avoids undue fluctuations in frequency and voltage on the transmission grid. System operator responsibilities include giving instructions as to when and how much electricity to generate (ie it dispatches generation) so that injections of electricity into the system match uptake by electricity consumers at each moment in time. The system operator also publishes the generator dispatch schedules, and is responsible for the operation of security of supply forecasting, monitoring and emergency management functions. The system operator is also responsible for ancillary services: five services essential to maintaining the common quality of electricity supply. These ancillary services are black start, over-frequency reserve, frequency-keeping reserve, instantaneous reserve and voltage support. Improving the ability and willingness of participants to compete in these markets will improve reliability and efficiency.

The wholesale information and trading system (WITS) is used to transfer information among participants, especially the uploading of bids and offers.

The reconciliation manager allocates volumes of electricity to generators and purchasers. It uses metering information supplied by participants and calculates unaccounted for electricity.

The pricing manager calculates and publishes final prices, which are used by the clearing manager to calculate invoices.

The clearing manager invoices and settles physical electricity sales and purchases identified by the reconciliation manager, ancillary service payments and any financial hedges required to be taken into account in the prudential calculation. It also maintains prudential security requirements.

The registry is a database that identifies every customer point of electricity connection to a local or embedded network. It enables customer switching between traders and contains key information for the reconciliation process.

The FTR manager creates, auctions and allocates financial transmission rights (FTRs).

The Authority is in the process of establishing the extended reserve manager as a new market operation service provider. The extended reserve manager will develop the methodology used to select industry participants to provide extended reserve, and manage the process of procuring extended reserve.

The Authority carries out the role of market administrator, providing several operational and administrative services to the market under the Code.

For more information on service provider contracts, which include detailed performance specifications, and reports, see the operations section of our website.

Market operation service providers