While admirable in intent, his proposals have already drawn flack from such organisations as the Major Electricity Users Group (MEUG) which is reported as saying power users could face a bill of $NZ60 million a year for capacity that may never need to be used.

MEUG chief executive Ralph Matthes has also questioned the government forecast that spot electricity prices will increase to an average 6c-7c a unit over time. Although spot prices had been trending upward from the 4c-5c level, Matthes asked if this would be the effect of New Zealand signing the Kyoto Protocol, plus the dry-year levy?

If true, this would erode the competitive advantages New Zealand currently enjoyed through its relatively cheap power prices. He said Australian forward electricity prices three to four years out were below A4c.

American Roy Hemmingway, who has spent the last few years doing similar work in Oregon, will chair the commission, whose five other members include a lawyer, two engineers, an economist and a local body politician. All have experience in various aspects of New Zealand's electricity industry.

Hodgson said he was confident the commission had the balance of skills necessary to meet the government's objective to "have power delivered in an efficient, fair, reliable and environmentally sustainable manner to all consumers".

Business, though, will be more interested in the accompanying policy statement than the make-up of the commission.

The commission will be expected to arrange a reserve energy supply of up to 1200 gigawatt-hours over a four-month period, roughly equivalent to 400-500MW of thermal plant generation, to be brought into the system once the wholesale spot price reaches 20c a kilowatt-hour or sooner if the commission feels hydro lake storage levels are too low.

The expected $NZ6 million commission levy, to cover the cost of reserve generation, will be in addition to the existing levy of about $NZ40 million a year to pay service providers, such as the wholesale market administrator and system operator. The commission will also have to produce a transmission policy to provide funding for improvements to TransPower's national grid system.

The government has already started creating the reserve by agreeing to pay State-owned Genesis Power $NZ100 million to build a 155MW thermal power station, probably at Whirinaki near Napier, as part of the dry-year reserve. However, it says building new plant may not be essential if the commission contracts for mothballed or retired plant to be held in "reserve".

However, industry commentators agree with Genesis Power boss Murray Jackson, who last month said building a new gas-fired power station "in lieu" of the reserve oil-fired Whirinaki plant would make more economic sense. Genesis could take the three gas turbines planned for Whirinaki and convert them into a gas-fired combined cycle station with greater efficiency and capacity, up to 250MW.