Energy and Resources Minister Judith Collins has announced the appointment of Lana Stockman and Mark Sandelin to the Electricity Authority.
The Electricity Authority is an independent Crown entity established in November 2010.
It is responsible for the governance and regulation of the electricity market and its objective is to promote competition, reliable supply, and the efficient operation of the electricity sector for the long term benefit of consumers.
Lana Stockman and Mark Sandelin have been appointed for terms of five years each commencing 6 June 2017. They fill vacancies left by Hon Roger Sowry and David Bull, who have now completed two terms with the Authority.
“Lana brings her experience working in executive and senior advisory roles in the Australian infrastructure sector, and experience in the New Zealand electricity industry. Mark brings significant legal expertise and skill, including dispute resolution experience, with the versatility to apply it to different issues.
“These appointments will benefit the Authority by bringing different skill sets and fresh thinking, complementing the appointment of Allan Dawson and Sandra Gamble in April.
“I would also like to take this opportunity to thank Hon Roger Sowry and David Bull for their significant contribution to the Authority since its establishment. Both also served the Electricity Commission, the Authority’s predecessor, so have dedicated a noteworthy period of time to New Zealand’s electricity sector,” Ms Collins says.
There will continue to be six members of the Authority, with the others being Dr Brent Layton (Chair), Allan Dawson, Sandra Gamble and Susan Paterson.
Background information on appointees:
Lana has recently returned to New Zealand from Australia, where she was Vice President Regulation at Aurizon Network, a top-50 ASX listed company offering rail and road based freight and infrastructure solutions. She was also a General Manager at Energy Australia, a board member of the Electricity Retailers Association of Australia, and a member of the Ministerial Advisory Council on smart meters in Victoria. Lana also has experience in the New Zealand electricity industry, including as an advisor to the Electricity Authority and its predecessor. She is degree qualified in both engineering and finance and coupled with a broad energy market experience, brings fresh thinking, and strong leadership, communication and relationship management skills.
Mark is currently a Partner at Minter Ellison Rudd Watts, and a Director of Fairway Resolution Limited, which is a Crown-owned company that provides independent dispute resolution services and other conflict management services. He is also Deputy Chair of the Auckland Grammar School board of trustees. Mark brings significant legal expertise and skills – he has practiced law for over 30 years, specialising in commercial and contract litigation work. He has extensive experience in dispute resolution, can apply his expertise to a range of issues, and has strong governance, leadership, communication, and relationship management skills.
Revenue Minister Judith Collins will travel to Europe today to represent New Zealand at a signing ceremony signifying New Zealand’s commitment to the OECD effort against base erosion and profit shifting.
“I’m honoured to represent New Zealand at the signing ceremony in Paris marking New Zealand’s entry into the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. This OECD measure works to prevent abuse of tax treaties by amending a worldwide network of several thousand bilateral tax treaties,” Ms Collins says.
Ms Collins will also travel to Norway to attend meetings related to her Energy and Resources portfolio.
Ms Collins will meet with the Norwegian Minister of Finance, the State Secretary of Petroleum and Energy and French and Norwegian industry leaders, in the oil, gas and renewable energy sectors to discuss future energy challenges, and discuss investment opportunities in New Zealand.
“France has a growing renewables industry and a number of innovative energy projects. I’m also interested in learning more about Norway’s approach to environmental protection and other regulatory operating systems in the energy sector.”
Ms Collins will leave on June 4 and return on June 11.
Revenue Minister Judith Collins has today welcomed the start of Inland Revenue’s information campaign on the Automatic Exchange of Information (AEOI) which is part of the OECD-led effort to combat tax evasion.
From 1 July 2017, financial institutions in New Zealand will be required to identify accounts held or controlled by foreign tax residents, and collect relevant information. This information will be reported to Inland Revenue by 30 June every year.
AEOI rules require financial institutions to pass on more information from foreign tax residents with both pre-existing and new accounts. This is in preparation for the first international exchange of information which will take place next year.
“Inland Revenue will pass this information on to the relevant foreign tax authorities to make sure everyone’s paying the right amount of tax. Taxpayers’ privacy and data security are important concerns for Inland Revenue and information will be shared safely and securely.
“The information campaign targets foreign tax residents with accounts here but also New Zealanders with accounts overseas since their information may be shared with Inland Revenue by other jurisdictions,” Ms Collins says. “This means a New Zealand tax resident with a bank account overseas can expect to have their identity and details such as their balance information shared.”
KiwiSaver schemes will be exempt from the information exchange so savers’ account information won’t be shared.
The initial list of 58 jurisdictions Inland Revenue can share with will be announced shortly and will be added to over time as more countries put the appropriate confidentiality and data safeguards in place.
More information is available at www.ird.govt.nz/infoshare.
Media contact: Julie Johnston 021 280 3253
Revenue Minister Judith Collins has today welcomed the release of an officials’ issues paper on the taxation of employee share schemes for start-up companies.
“Employee share schemes are an important remuneration tool for start-ups as they can assist companies to both attract and retain talented staff. However, it is equally important that employee share schemes are taxed like any other form of remuneration.
Generally, employees who receive free or discounted shares from their employer are taxed on that benefit when they acquire the shares. If the employee is receiving a large proportion of their remuneration in this way, paying the tax can be difficult. Even valuing the shares can be difficult, if the company is in the early stages of development.
The officials’ issues paper, Taxation of employee share schemes: start-up companies sets out proposed deferral rules aimed specifically at start-up companies with employee share schemes.
The deferral rules would delay the time when the employee recognises income from the benefit. Generally the employee would not have income unless and until the shares are sold or listed on a stock exchange. There would be a seven year limit on the deferral.
“Shares in start-up companies can often be difficult to value or sell, making it hard for employees to meet their tax liabilities when they become the full owner of the shares. Deferring the taxing point should ease that problem,” says Ms Collins.
The issues paper follows the development of new rules for taxing employee share schemes that were included the recently introduced Taxation (Annual Rates for 2017-18, Investment and Employment Income, and Remedial Matters) Bill. These recommendations:
ensure that employee share scheme benefits are taxed in a similar way to equivalent cash remuneration prevent benefits equivalent to share options being provided tax free give employers a deduction matching the employee’s income expand and modernise the tax exemption for widely offered share schemes.
“The proposals contained in the issues paper are aimed at greater fairness without penalising start-ups,” Ms Collins says.
Submissions on the consultation document at, www.taxpolicy.ird.govt.nz close on 12 July 2017.
Many business expenses currently written off as black hole expenditure would become tax deductible under proposals released as part of Budget 2017, Revenue Minister Judith Collins says.
“Some costs of investigating the viability of a new proposal or project – that is, feasibility expenditure – are currently neither immediately tax deductible, nor depreciable. As a result, it falls into what businesses describe as the black hole,” Ms Collins says.
“Tax consequences should not be an obstacle to businesses innovating and pursuing opportunities for growth. The discussion document we are releasing today therefore proposes improved tax treatment for feasibility and black hole expenditure.
“Where no asset is created on the balance sheet, feasibility expenditure would be immediately deductible for income tax purposes. Where an asset is created we’re proposing that the feasibility expenditure would be capital expenditure for tax purposes.
“In addition, capitalised feasibility expenditure and other expenditure on an asset abandoned part way through construction would become immediately deductible if it is also expensed under International Financial Reporting Standards.
“We’re asking for views on a range of aspects of the proposals including the timing for application. If businesses are not making investments today because of the current treatment, we welcome feedback on making the change retrospective. Doing so would give businesses certainty that investments currently being considered would be in line for this improved tax treatment,” Ms Collins says.
“The Government has already resolved many types of black hole expenditure over the past few years to improve productivity and remove a tax impediment to growth. These proposals will allow an even wider range of costs to be deductible for tax purposes.”
Public feedback on Black hole and feasibility expenditure at www.taxpolicy.ird.govt.nz is open until 6 July.
The fact that 138,000 people have switched electricity retailers already this year shows competition is strong and consumers continue to shop around for a good deal on their power bill, says Energy and Resources Minister Judith Collins.
“The What’s My Number website is a quick and easy way for New Zealanders to figure out if they are already on the best deal, or if they could be saving on their power bill by switching provider.”
More than 2.3 million New Zealanders have switched since the What’s My Number campaign started in 2011, with total estimated savings valued at $251 million.
“The government is committed to a competitive retail electricity market that empowers consumers. The number of New Zealanders switching providers shows that consumers continue to seek out the best deals for themselves.”
Ethnic Communities Minister Judith Collins has today announced the appointment of eight Trustees to the Chinese Poll Tax Heritage Trust.
The Trust aims to create a heightened understanding of the Chinese community within New Zealand and to strengthen the unique identity of Chinese New Zealanders.
The Minister has reappointed Kai-Shek Luey, Virginia Chong and Richard Leung for a second term on the Trust. Malcolm Wong, Mark Ngan Kee, Paul Chin, Melissa Wong, and Elisabeth Mei-Xing Ngan have been appointed for their first terms. All terms commence on 15 May 2017 and expire on 14 May 2020.
All eight Trustees are heavily involved in the Chinese and poll tax communities, in addition to a mix of skills and experience in governance, community work, business, finance, directorship and language to the work of the Trust.
The Minister thanked the outgoing Trustees, Peter Chin, Esther Fung, Stanley King, Justine Kohing, and Susan Wong for their significant contribution to the Trust.
I am delighted to be addressing you as Energy Minister as I understand just how vital this portfolio – including your part in it – is to our New Zealand way of life.
Electricity is fundamental to our well being and necessary to our economic success. As trustees of distribution companies you are the stewards of this important sector.
For many decades the electricity industry was largely stable and secure with little change.
Supply followed forecast demand in a predictable manner, and planning for the future largely required simply adding new wires and poles as required.
Today all that is changing, largely due to new emerging technologies, ranging from solar PV and battery storage to intelligent IT systems that help manage networks more effectively.
Responding to change and uncertainty requires nimble and astute management.
The government has a role to provide appropriate governance and regulatory arrangements that give you the necessary flexibility to deliver the infrastructure and services needed for tomorrow’s energy users.
But we also expect you to step up and rise to the challenges the future brings.
In my recent trip to the United States, I saw some of the emerging disruptive technology, and the impact this is having on the energy sector.
The rate of technological change which is evolving at pace will have big implications for the electricity sector, especially distribution companies.
The combination of software with rapidly improving batteries and solar technology will see consumers better manage their own electricity utilisation, allow for alternative generation through community-based micro-grids, and allow consumers to potentially trade in energy – for example, selling to each other or back to the grid. Storage is seen as the new frontier.
Changes like these will have a significant impact on the utilization of trust-owned assets in the future, and this is something I am sure you are all thinking about now.
It is anticipated that many of the future innovations in energy supply and demand management may come from non-traditional market participants, such as software companies – with potential disruption and fundamental changes in the way generators, distributors, and retailers think about their business models.
For you, this increasing pace of change will challenge the traditional model of infrastructure planning and investment.
Trust ownership and governance
The model we have for trusts, and the electricity distribution sector more broadly, dates back to reforms initiated in the 1990s.
This model was introduced as an ownership vehicle, chosen by some communities in the early 1990s. It retained ownership of the local power network by the community, while also delivering the benefits of the stronger commercial focus that came with corporatisation (which was required under the Energy Companies Act 1992).
Overall, the model appears to have delivered value for consumers. However, it is valid to question whether these arrangements are still fit for purpose and whether consumers will continue to see value in the future.
My starting point is that your core business is electricity lines. You are there to ensure your communities receive efficient and reliable access to electricity infrastructure.
We’ve had some notable examples where distribution companies have invested in areas completely unrelated to the sector.
I am not privy to the economics of these specific investments and even if I was, that is not necessarily my concern as Energy Minister.
My point is that you should aim to stay focused on your core business in order to successfully adapt to technological change, meet the needs of consumers, and ensure that the value of your considerable assets is maintained.
The risks arising from disruption by rapidly changing technology are also very relevant to the consideration of future trust ownership and governance.
One question is whether the trust model is a constraint on getting the benefits of greater scale in distribution businesses. It is reasonable to assume the businesses with greater scale will be best placed to trial and test new smart technologies, and to attract the capital and skills necessary to succeed in an electricity system that is rapidly becoming more complex.
If you drop the ball and are unable to adapt to these challenges, and to meet the evolving needs of consumers, then the value of the community assets entrusted to you will erode.
There are a number of initiatives underway by a range of different parties, which may have some bearing on the future operations of trust owned companies.
For example, the Electricity Authority has work underway with its Distribution Pricing Project, and the Commerce Commission’s Input Methodology Review shows it is actively concerned with the effects of new technology on the sector.
This work by the regulators is intended to enable them to fine-tune their respective regulations to better manage the effects of new technology and ensure electricity consumers see the greatest benefits.
While these two regulators already communicate well and work together on matters of common interest, there is scope for greater coordination.
This is why MBIE has set up a Council of Energy Regulators to share information and identify emerging issues, if and when they arise, and to work collectively to resolve them.
MBIE also plans to develop and publish an energy regulatory system charter, to document how the different parts of the regulatory system work together, and to help identify any areas for improvement.
The issue of distribution company efficiency and governance was raised by the International Energy Agency in its 2017 In Depth Review of New Zealand energy policy.
This report recommended directing the Productivity Commission to review the electricity distribution sector to identify opportunities to improve the sector’s productivity, flexibility and capability in order to meet technological change, including examining the sector’s structure and governance.
While the Productivity Commission could provide valuable insight and recommendations in this area, it may be just as effective to better coordinate the ongoing work of the Commerce Commission, the Electricity Authority, MBIE and the Auditor General. MBIE will report to me on the advisability and usefulness of having the Productivity Commission review the distribution sector and the government will consider that advice.
My visit to the United States reinforced to me the potential of electric vehicles to New Zealand. I toured the Tesla factory in California and was impressed with their hi-tech approach.
Equally impressive is the fact that they manufacture their products in-house. The company reiterated its intention to build a bigger market in New Zealand.
EVs are seeing substantial growth in San Francisco – which is encouraged not just to reduce carbon-emissions but to improve urban air-quality and reduce noise. Again, the pace of change is astounding. Five years ago there were only four EV models available – now there are 40.
It was interesting to see how other countries incentivise uptake – in San Francisco they provide rebates, but also use similar measures to those we are introducing, such as access to special vehicle lanes.
With more than 80% of our electricity generation being renewable, electric vehicles are an excellent option for New Zealand.
I am encouraged by the role the electricity sector is taking to support the uptake of EVs. I believe energy trusts have a role to play here and I know some of your businesses have already taken some action.
Your distribution businesses stand to benefit from EVs, through greater utilisation of network assets, and your communities stand to benefit from improved air quality, as well as helping to reduce carbon emissions.
The impact of solar PV
Solar energy is still small in volume in New Zealand, but is expected to grow in importance as its costs continue to decline.
The Government’s view is that solar power is currently not the most economic and efficient option for New Zealand compared to other renewable alternatives that we have available.
It has a higher cost than hydro, wind and geothermal systems that are currently supplying the national grid, and it does not produce power at night.
Hence growth in solar power may displace cheaper renewable fuels and probably does not reduce the need for network investment (which is typically driven by winter night peaks).
However, we recognise that the world is changing. Solar costs are decreasing and new battery technology is becoming more widespread.
This could see solar generation become cost competitive with grid-based generation across the board within a decade, and batteries could help improve network utilisation.
In California I visited Siemens and Solar City which highlighted to me the emerging opportunities that could arise in New Zealand from more productive solar generation, improved integration of energy infrastructure, battery storage technology, and digital management systems.
It is important that you as trusts keep an eye on these developments as they have the potential to impact significantly on your businesses.
I am aware there is a concern about pricing structures for solar, with some arguing that existing tariffs – particularly volume-based tariffs – implicitly subsidise solar PV, because customers without solar PV will have to pay a bigger share of common network costs.
This issue seems to be broadly recognised across the industry, and you will be aware that several electricity distributors and retailers are developing plans to reform retail tariffs to make them more service-based and cost-reflective.
The Government supports this reform effort, which is enabled by the country’s significant and ongoing investment in smart metering. New Zealand has an abundance of cheap wind and geothermal generation able to be developed, and we want the power system to provide good incentives for the full range of resources – including demand response and batteries – that have the real potential to reduce costs and increase benefits overall.
Transmission Pricing Methodology
As I’m sure you are all aware, the Electricity Authority has been consulting on proposed revisions to Transmission Pricing Methodology (or TPM). The Authority’s recent work is the continuation of an attempt to resolve a problem that has vexed the industry for several decades.
Any change to the status quo, and even the status quo itself, can be contentious.
The delay announced on April 26 by the Electricity Authority to redo its cost benefit analysis is unfortunate, as delay prolongs the regulatory uncertainty for stakeholders. I also am aware that some parties see this further delay as a reason to cancel the process, or for me to intervene in some way.
Legally, my powers to intervene are limited, even if such action was desirable. However, I can and will ensure that the Authority keeps me and my officials fully informed of its intentions going forward and works closely with Transpower to ensure that if and when a new TPM is developed, that it is workable.
In closing, I would like to reiterate how important the distribution sector, and particularly trust owned companies, are to New Zealand – both in terms of powering our economy and contributing to the wellbeing of our people.
The Government looks to your sector to deliver innovative solutions that will allow consumers to benefit from new technologies.
We recognise that the future presents a number of challenges that may call into question existing business models and technologies.
I look forward to your sector’s solutions in response to these challenges.
More than $10 million in research and development loss tax credits have already been paid out after the first year of a scheme designed to help start-up companies access some of their tax losses sooner, Revenue Minister Judith Collins says.
Pay-outs are still being processed for the last financial year, which saw 187 companies successfully lodge applications to `cash out’ business losses associated with R&D spending.
“This has been a tremendous initiative for helping innovative start-up businesses with the cash flow they need to turn their ideas into a reality. I’ve been pleased to see how easy it is to claim the credit,” Ms Collins says.
By following the clearly laid out steps on the website, businesses are spending less time on paper work and more time on developing their product.
“I was delighted to see the difference it made for the two kiwi businesses profiled on the Inland Revenue website.
“These are exactly the sort of companies to help get their big ideas off the ground and the R&D loss tax credit is helping them do that,” Ms Collins says.
Applications are currently open for the 2016/17 financial year. Eligible businesses can claim a credit of up to $224,000.
More information on the R&D loss tax credit along with videos profiling two companies that have benefited can be found at www.ird.govt.nz/rd-credit.
Inland Revenue will waive use of money interest on late tax payments when flooding has prevented people from paying on time, say Lead Minister for Edgecumbe Anne Tolley and Revenue Minister Judith Collins.
“In the aftermath of the Edgecumbe and Bay of Plenty floods businesses in affected areas have enough to deal with without having to worry about their tax obligations at the same time,” Mrs Tolley says.
“Inland Revenue will waive use of money interest on late tax payments and will cancel late filing and late payment penalties for taxpayers who are unable to pay their tax by the due date because of the recent flooding,” Ms Collins says.
The terminal tax date for the 2016 income year for taxpayers with tax agents was 7 April, and 20 April is a due date for employers.
Inland Revenue has also announced discretions on income equalisation for farmers who are significantly affected by the flooding.
“This will allow people to make late deposits from the 2016 income tax year and to apply for early refunds. This means farmers and fishers can average their taxable income over several years more easily,” Ms Collins says.