Rules and Legislation

LEGISLATION APPLYING TO TRUSTS

The following outline of relevant legislation covers the various Acts that define the role and responsibilities of the trusts and trustees that make up ETNZ’s membership. Other more general legislation may also be relevant.

1. Electricity Industry Act 2010

Background

This Act set in place the current regulatory framework for the wider electricity industry. It established the Electricity Authority, in place of the old Electricity Commission, and gave the Authority quasi-regulatory powers within its defined role of managing the electricity industry.

Electricity Industry Act 2010: sections 99-104

These provisions require trusts owning electricity distributors to:

  • Prepare annual financial statements in accordance with generally accepted accounting practice. Audited financial statements must be published and made available to beneficiaries.
  • Hold an annual meeting of beneficiaries, with a quorum minimum of 20 beneficiaries. There are only two items of mandatory official business at annual meetings. These are:
  • The appointment of an auditor; and
  • The fixing of the remuneration of the auditor.

If this is not done at the annual meeting then the auditor will be the Auditor-General.

These provisions also deal with notices and other procedural requirements for the annual meeting. (Sections 207B and 207T to 207W of the Companies Act 1993, on the reappointment or termination of auditors also apply.)

 

2. Trustee Act 1956

Until the Trusts Bill introduced in 2017 becomes law, this is the main piece of legislation governing the conduct of trustees. It covers a wide range of issues including:

  • Trustees’ powers of investment.
  • The appointment and discharge of trustees.
  • The powers of the Court in relation to the supervision of trusts and trustees.

The Trustee Act is not a complete code of the rules that apply to trusts and trustees. Each trust has a Trust Deed that can modify some of the provisions of the Trustee Act.

Some areas are not covered by either the Trust Deed or the Trustee Act. Other legislation can apply to trusts and there is a substantial body of general law that has been built up over several centuries by the Courts.

 

3. Electricity Act 1992

This is a very substantial Act covering a wide range of issues including:

  • The powers and duties of electricity operators and owners of electrical works.
  • Codes of practice for the industry.
  • Registration and licensing of electrical workers.

 

4. Energy Companies Act 1992

This is the Act that provided for the formation of the original energy companies that controlled electricity distribution and retailing through to 1998, and the vesting of the undertakings of their predecessors – the electricity power boards – in those companies. It is the Act that laid the foundation for the lines companies (electricity distributors) existing today.

The ownership of the new companies by Lines Trusts was the most favoured form of ownership and establishment plans for all companies were submitted to and approved by the Minister of Energy.

Sections 36 to 46 set out provisions relating to the operation of the companies and include the requirement for statements of corporate intent (“SCI”) (section 39). SCIs are submitted by the directors of the company to the trustee shareholders in draft. Trustee shareholders are entitled to make comments on the draft, and the directors are required to take those statements into account. Shareholders have the power from time to time by resolution passed at any general meeting of the company to require the directors to modify, to a limited extent, the SCI.

 

5. Electricity Industry Reform Act 1998 (replaced by Electricity Industry Act 2010)

This legislation implemented the so-called Bradford reforms, that forced the separation of line and energy businesses. A succession of subsequent changes to the 1998 Act and its incorporation into the Electricity Industry Act now enable lines businesses to re-enter the generation and retail markets subject to various internal governance arrangements being in place in those lines business, although a 75 GWh limit on annual retail sales remains as a constraint (the average lines network handles over 1000 GWh annually).

 

6. Commerce Act 1986

Part 4 of the Commerce Act defines the Commerce Commission’s role and powers as the main regulator of lines businesses. There are several clauses in the Commerce Act that are of particular relevance to Trustees:

  • Section 54G exempts most trust-owned electricity lines companies from price and quality regulation under the Act (Secton 54D of the Act sets out the requirements for trustee elections that must be met to maintain exempt status, defines ‘consumer-owned’, ‘community trust, ‘customer co-operative’, etc. and sets a maximum size limit for exemption of 150,000 ICPs). Note that all lines companies remain subject to the information disclosure requirements of the Act.
  • A number of clauses give the Commerce Commission wide information-gathering powers. In particular, s98 gives the Commission the power to require any person – including a Trustee or Trust – to provide any information that it considers necessary or desirable to allow it to carry out its functions.
  • Section 53Z etc. allows a regulated company to apply for a ‘customised price path’ if it feels it is unduly disadvantaged by the normal ‘default price path’ arrangements. See Part II for discussion on this.
  • Section 54Q requires the Commissin to provide incentives and avoid imposing disincentives for energy efficiency and demand-side management investments.

 

7. Health & Safety Legislation 

Workplace and public safety are critical issues for the electricity industry. The Electricity Act 1992 requires regulations to be in place for electricity safety management systems, and – significantly for Trustees – the Health and Safety at Work Act 2015 creates clear lines of reponsibility for workplace safety, reaching up to senior staff and directors of all companies.

 

8. Companies Act 1993

In general the Energy Companies Act 1992 specifically cover some of the ‘Companies Act’ types of provisions as these relate to Trusts. However, sections 207B and 207T to 207W of the Companies Act apply as if references to a company were to a trust, references to a director were to a trustee, references to a board were to the trustees, etc. Also, directors of all companies must have responsibilities under the Companies Act, including the requirement to act in the best interests of the company.

 

9. Financial Reporting Act 2013

Any trust auditor must be qualified in terms of the Financial Reporting Act.

THE ELECTRICITY AUTHORITY’S CODE

The Electricity Industry Act 2010 requires the Electricity Authority to maintain an Electricity Industry Participation Code, covering matters such as the efficient operation of the electricity industry, the supply of power to consumers, and competition in the industry. The Code is a long, complex document, divided into sections that cover everything from metering through to distribution companies’ use of system agreements and tariffs. Under the Act the Authority has wide powers to effectively impose regulatory controls at all levels of the electricity industry.

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