General policy statement
This Bill is an omnibus Bill introduced under Standing Order 263(a). That Standing Order provides that an omnibus Bill to amend more than 1 Act may be introduced if amendments deal with an interrelated topic that can be regarded as implementing a single broad policy.
The broad policy of this Bill is to encourage energy innovation, such as emerging energy technologies and increased variation in energy-related business models, so that New Zealand has the ability to respond to its environmental and energy objectives. The Bill amends the Electricity Industry Act 2010, the Energy (Fuels, Levies, and References) Act 1989, the Land Transport Act 1998, and the Road User Charges Act 2012.
New Zealand’s environmental and energy priorities have been changing. Our increased focus on improving the efficiency of our energy use and on our climate change commitments requires a greater focus on transport energy and process heat (that is, the use of geothermal energy, gas, wood, or coal to create heat for processing (eg, for drying milk)). Meanwhile, varying business models in the electricity sector are testing definitions in the legislation. The Bill will support this change in focus to reduce emissions and improve energy productivity, while ensuring our legislation can accommodate innovation (such as electric vehicles and changing business models).
The Bill will achieve this by—
amending the Electricity Industry Act 2010 and the Energy (Fuels, Levies, and References) Act 1989 to allow the Government, through the Energy Efficiency and Conservation Authority (EECA), to focus levy funding on the areas where the greatest impact can be made, as well as to improve the operation and administration of those levies:
amending the Land Transport Act 1998 and the Road User Charges Act 2012 to implement measures to encourage the uptake of electric vehicles, specifically by extending the road user charge exemption to include heavy electric vehicles and clarifying a bylaw-making power so that road controlling authorities (RCA) may make bylaws to provide for electric vehicles (EVs) to have access to bus and high occupancy vehicle lanes:
amending the Electricity Industry Act 2010 to clarify how electricity industry legislation applies to secondary networks (as a growing business model in the sector).
Changing EECA’s levy funding
The EECA is the Crown entity that works to encourage, promote, and support energy efficiency, energy conservation, and the use of renewable sources of energy. Under the EECA’s current funding model, its entire levy funding (almost half of its total funding) is recovered from the electricity efficiency levy charged under section 128 of the Electricity Industry Act 2010 (the electricity efficiency levy), which can only be spent on electricity efficiency activities.
The Bill amends the Electricity Industry Act 2010 and the Energy (Fuels, Levies, and References) Act 1989 to expand the purpose of 3 existing energy levies. The electricity efficiency levy is being amended to enable it to fund any of the EECA’s activities, instead of being limited to electricity efficiency activities. Section 14 of the Energy (Fuels, Levies, and References) Act 1989 is being amended to allow the petroleum and engine fuels monitoring levy (PEFML) and the levy on piped natural gas (the gas levy) to fund the EECA’s activities.
The Bill enables the cost of the EECA’s activities to be spread across electricity, transport fuels, and gas users and provides for levy funding to be used for any of the EECA’s activities to encourage, promote, and support energy efficiency, energy conservation, and the use of renewable sources of energy (in accordance with its statutory function). This will enable the EECA to use its levy funding to undertake a broader range of activities giving it flexibility to focus on areas where the gain is the greatest.
The Bill recognises the importance of transparency and accountability. The Bill requires the EECA to consult annually all levy payers and representative groups on the amount it proposes to spend from each levy. The intention is for this to include consultation on a draft work programme that shows which levy will fund each programme (including the rationale for using that levy) and proposed total amounts for each levy type. Further, it is also intended that the EECA will report on and publish its work programme annually, including how levy money was spent.
The Bill requires the EECA to report on the outcome of the consultation when it makes a request to the Minister on its appropriation for the following financial year. The Minister then determines how the levy funding will be apportioned between the 3 levies.
The Bill also enables the electricity efficiency levy to be aligned with the PEFML and gas levy by allowing the electricity efficiency levy to be adjusted in out-years to account for any underspend rather than money being refunded annually. This is consistent with the current approach to multi-category appropriations and improves the administrative simplicity of the levy.
The Bill makes other changes to improve the operation and administration of the 3 levies, particularly where the rates are currently set in the Energy (Fuels, Levies, and References) Act 1989. The changes will provide flexibility in how levy rates are set to ensure appropriate amounts are collected.
Allowing EVs access to bus and high occupancy vehicle lanes
The Bill amends the Land Transport Act 1998 to clarify that an RCA may use its bylaw-making powers to give EVs access to special vehicle lanes. EVs in this context are vehicles which are powered solely by electric batteries, as well as plug-in-hybrid vehicles that operate on a combination of externally charged batteries and a petrol or diesel motor. This is because these plug-in EVs make use of New Zealand’s renewable electricity and therefore offer the most potential for emissions reduction.
When using its bylaw-making powers, an RCA can balance other transport objectives when deciding which special vehicle lanes to allow EVs access to in order to deliver the maximum level of total benefit.
Further changes to give full effect to this policy will need to be made to the Land Transport (Road User) Rule 2004 and the Land Transport Rule: Traffic Control Devices 2004. (These changes include adding a definition of EVs, altering bus and transit lane definitions to include EVs as permitted users if RCAs make relevant bylaws, and requiring road signage or marking showing when EVs may use such lanes.) The Ministry of Transport intends progressing these rule changes separately under section 152A of the Land Transport Act 1998.
Exemptions to road user charges
The Bill amends the Road User Charges Act 2012 to enable heavy EVs to be exempted from road user charges (RUC), which is an extension of the current RUC exemption for light EVs. Extending the RUC exemption to heavy EVs is a transparent and efficient way to provide a financial incentive to encourage heavy EVs over equivalent conventional heavy vehicles. The intention is that the RUC exemption for heavy EVs should be in place until they comprise 2% of the heavy vehicle fleet.
The Bill inserts a definition of heavy electric RUC vehicles, and includes a power for the Governor General, by Order in Council, to specify a period during which RUC are not payable in respect of a heavy electric RUC vehicle.
The Bill clarifies that electricity industry legislation applies to secondary networks, which are electricity networks that are indirectly connected to the national grid. Secondary networks as a developing business model have been increasing in number as more companies utilise the unique model that they offer. Providers of secondary networks can undertake the same activities as electricity retailers and electricity distributors (local electricity network owners) and should be subject to the same regulatory requirements. It is clear when they meet the definition of an electricity retailer, but there is some ambiguity in the legislation about whether they meet the definition of an electricity distributor.
The Bill amends the Electricity Industry Act 2010 to clarify that the Act, and the regulations and Code made under the Act, apply to secondary network providers where the services provided are akin to those of an electricity distributor. Owning and operating a secondary network offers business owners opportunities for integrating new energy technologies, such as combining solar photovoltaics and battery storage on a residential subdivision, and for providing those to consumers.
The Bill ensures the legislation provides certainty to the industry regulator (the Electricity Authority) that the services provided on secondary networks are within its scope. It will also improve market and consumer outcomes (for example, by ensuring that consumers on secondary networks have the same access to dispute resolution as consumers on local electricity networks).