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Regulatory Impact Statement: National environmental standards for electricity transmission activities

September 2008

Executive Summary

The New Zealand national grid is owned and managed by Transpower. The majority of the grid was constructed before the Resource Management Act 1991 (RMA) came into force, and has rights under the RMA to continue as an existing land use. However, these rights do not apply to upgrading transmission lines. Transpower obtains resource consents for upgrading and some maintenance activities as required by rules in district and regional plans. The key problem is the lack of consistency in plan rules (consent requirements for transmission activities vary significantly between district plans) and often the lack of specific provisions for transmission activities. The National Policy Statement on Electricity Transmission (NPS), which took effect in April 2008, addresses the variable recognition of national benefits of transmission in plans and council decision making. In order to give effect to policies and objectives set out in the NPS, councils must notify and process a plan change or review by April 2012. The national environmental standard for transmission activities (NES) would assist councils in implementing the NPS within specified timeframes, by providing a set of nationally consistent rules which take immediate effect without going through the plan change process. The NES would also assist councils by reducing RMA costs associated with transmission activities and significantly reduce Transpower’s plan advocacy costs and the costs of RMA approvals. The net benefits over ten years are estimated to be between $4.4 and $5.5 million (present value) and the benefit cost ratio between 5.3 to one and 6 to one.

Adequacy Statement

The Regulatory Impact Analysis Unit has reviewed the RIS and considers the RIS is adequate according to the adequacy criteria set out in CO (07) 3.

Status Quo and Problem

The national grid is the high voltage electricity transmission network owned and managed by Transpower New Zealand Ltd that delivers electricity from generators to demand centres. It comprises over 12,000km of transmission lines, and traverses all districts in New Zealand.

The majority of the national grid was constructed before the RMA came into force in 1991, and has rights under the RMA to continue as an existing land use, provided the effects are the same or similar in character, intensity and scale to those which existed previously. Upgrading transmission lines, and activities controlled by regional plans, are beyond the scope of the “existing use” provisions. Transpower obtains resource consents for upgrading and some maintenance activities as required by rules in district and regional plans. Transpower also has the option of obtaining RMA designations (the right to do something that would otherwise contravene a rule in a plan, discussed further in the Alternative Options section below), and is likely to do so for major upgrades.

Councils consider resource consent applications and requirements for designations within the resource management framework set out by the relevant plan, and the policies and objectives of the National Policy Statement for Electricity Transmission (the NPS). Transmission operation, maintenance and upgrade activities (transmission activities) are the same regardless of where they are carried out. For example the same methods are used for cleaning and painting towers throughout the country. However, the consent requirements for transmission activities vary significantly between district plans. Transmission activity projects frequently span several districts, and delays or complications in one district can cause delays in the whole project.

A review of the consent requirements in district plans showed that while many plans make provision for “minor upgrading” as a permitted activity, the definition of minor upgrading can vary, and plans frequently contain terms and conditions which limit the activities which can be carried out as permitted.

District plans are written to be easy to follow for the majority of their users, those contemplating undertaking a specific activity on a specific site. While some plans have chapters specifically setting out rules for network utility operators, two thirds of district plans defer to specific zone rules or general plan rules. In these plans it is very difficult to determine the potential consent requirements for a transmission activity comprising a range of types of activity and crossing several zones.

The NPS took effect in April 2008. It was prepared partly to address the variable recognition of the national benefits of transmission in plans and council decision making, in light of growing pressures on the transmission network and the expectation that the number of transmission projects will increase over the next decade..
The NPS contains policies and objectives designed to provide a nationally consistent policy framework that ensures decision makers recognise the national significance of the electricity transmission network by facilitating:

• The operation maintenance and upgrade of the existing transmission network, and
• The establishment of new transmission resources to meet the needs of present and future generations.

Councils must notify and process a plan change or review to give effect as appropriate to the provisions of the NPS, by April 2012. This means that councils will need to review their plan rules, and formulate new rules where necessary. The costs to councils of implementing the NPS are estimated to be $4 million for plan changes and appeals.

If councils individually formulate rules to address providing for transmission upgrades, there will be a large resource cost which could potentially be reduced through a more integrated approach. The lack of national consistency in individual plan rules will remain under the NPS unless there is co-ordination in the writing of specific rules. In addition, there will be a period where in most districts and many regions, there will be an operative plan relating to electricity transmission as well as a proposed plan change. This will greatly increase the difficulty in determining consent requirements.

The key problem is the lack of national consistency in plan rules concerning electricity transmission activities, and the lack of adequate provision in many plans for maintenance and upgrade of transmission networks. Plan changes through a public consultation process (as required by the NPS) will not ensure national consistency nor that the new plan rules will fully achieve the intention of the NPS. A significant proportion of the of the NPS implementation cost is likely to be for changes to rules, for both transmission activities and to protect transmission lines from third party activities.

Objectives

The objective is to support the implementation of the provisions of the NPS relating to transmission activities by:

• minimising the cost of implementing the NPS
• ensuring that plan requirements are nationally consistent and provide adequately for maintenance and upgrading to achieve the intention of the NPS
• minimising RMA processing costs and delays.

Alternative Options

The alternatives considered were:

• non-statutory guidance
• New Zealand Standards
• Ministerial call-in and Crown submissions
• designations.

The criteria used for assessing the options against the status quo (NPS in place but no NES) are:

• minimising the cost of implementing the NPS
• providing a nationally consistent framework of consent requirements for transmission activities
• providing for the effective operation, maintenance, and upgrading of the network (NPS policies 2 and 5)
• considering the operational requirements and technical constraints when determining measures to control the environmental effects of transmission activities (NPS policy 3)
• managing environmental effects of transmission activities
• minimising RMA processing costs and delays
• being effective within the timeframes specified in the NPS (plan change processed by April 2012).

Guidance

National guidance could be provided on good practice in making plan changes to give effect to the NPS. This could build on current Ministry for the Environment good practice guidance. It could include model plan rules to encourage councils to derive a consistent rule framework.

This option could reduce initial costs to councils in preparing proposals for plan rules, but each council would still have to review their plan and propose specific amendments. Amendments could be extensive for plans which deal with transmission activities through a set of zone-based rules (different requirements for different areas of a district).

The biggest problem with guidance alone is that it is unlikely to result in a set of nationally consistent plan rules, because it will not have the force and effect of a NES made under the RMA. By the time a set of model rules has been through the plan change consultation process and the council and possibly the Environment Court has considered submissions and appeals, it is likely that the model rules will have been changed considerably.

While guidance could be relatively effective in ensuring that the plan changes notified give effect to the requirements of the NPS, there are no guarantees that this will be the case once the proposed rules have been through a public submission process. The extent to which the eventual rules balance enabling transmission activities with managing environmental effects will be variable, and influenced by the submissions received by each council. The extent to which the new rules minimise RMA processing costs will depend on the eventual requirements.

Guidance could be available in time to be used by councils for plan changes.

Preparation of New Zealand Standards

Standards New Zealand could be invited to assemble a committee of experts and interest groups to prepare a New Zealand Standard (NZS) on model plan rules to give effect to the NPS. A NZS could set out suggested conditions for permitted activities, and consent categories for activities where the effects are more than minor. However, a NZS would be voluntary unless called up in a plan.

The effect of a voluntary NZS would be similar to the effect of guidance (discussed above). A NZS is no more likely to reduce costs to councils, reduce the number or complexity of submissions on plan changes, and would not ensure national consistency.

Ministerial call in

This procedure involves the Minister for the Environment calling in, under the RMA, a private plan change or application for resource consent or notice of requirement for a designation, to be determined by either a Board of Inquiry or the Environment Court. In order to use the call in power, the Minister must determine that the proposal is, or is part of, a proposal of national significance. For instance, the Minister determined that the major North Island Grid Upgrade project should be called in.

Call-in could not be used for plan changes initiated by the Council, as it only applies to private plan changes. Call in of numerous smaller transmission projects would be inappropriate, and in any case would not reduce costs or delays. This option would not meet the objectives.

Crown submissions

The Minister for the Environment can make submissions on behalf of the Crown. Submissions could be made on plan changes to give effect to the NPS. This may remind councils of the requirements of the NPS, and address any deviations from the intention of the NPS. However a Crown submission is only one of many submissions to be considered by councils in making a decision on plan changes, and cannot ensure national consistency. It may contribute marginally to ensuring that the criteria relating to implementing the NPS are met, but would be unlikely to affect the costs of implementing the NPS or reduce RMA costs and delays.

Crown submissions could be prepared on individual consent applications for transmission activities in support of the objective and policies set out in the NPS. However, Council decision makers are already required to take account of the NPS in making decisions on resource consents and recommending on designations. Council officer reports and council decisions since the NPS came into force appear to be taking the NPS into account effectively. Government submissions on specific applications would not affect the costs of implementing the NPS or improve the national consistency of plan rules. Unless subsequent decisions fail to take account of the NPS, Crown submissions do not seem to be necessary.

Designations

A designation is a provision in a district plan that identifies an area of land for use for particular public works or projects. A designation enables a “requiring authority” (the Minister for the Environment has approved Transpower as a requiring authority) to undertake specified land use activities without obtaining resource consents. A “notice of requirement” for a designation would be issued by Transpower, which would make a decision following a recommendation by the council. The public can make submissions and appeal to the Environment Court in a similar process to that used for resource consent applications. Landowners affected by a designation can apply to the Environment Court for an order obliging the requiring authority to purchase or lease the land.

Designations could provide Transpower with security of tenure over the transmission network, and the right to undertake work on the network without requiring consents from the district council. Consents would still be required from the regional council. Designations are a useful tool for new lines and significant major upgrades involving replacing and extending infrastructure, such as the major North Island Grid Upgrade. However, projects of this nature are beyond the scope of this exercise.

Designations would only be a viable alternative to the plan reviews required by the NPS if designations were taken out over all transmission lines in each district. In this instance, a council could argue that the need for rule changes has been overtaken by the inclusion of designations in the plan. This option would cost at least as much notifying plan changes, as designations are likely to attract at least as many submissions and appeals as changes to plan rules. In addition, there would be considerable costs to Transpower in preparing notices of requirement over the whole network, compared with the cost of a submission to a plan change. Once designations were in place there would be additional costs, if landowners apply to the Environment Court for an order under the Public Works Act 1981 obliging Transpower to acquire all or part of their land. Anecdotal cost estimates for Transpower acquiring an interest in land range from around $100million for rural easements to in excess of a billion dollars for purchasing properties outright.

In addition to the significant costs, designations would differ between districts depending on the outcome of the submission and appeal process. Eventual designations would be likely to provide for the land use aspects of transmission activities and take account of operational requirements, and take account of the environmental effects.

It is unlikely that Transpower could secure designations over many transmission lines by 2012, and to designate the whole network would take at least a decade. This process could be speeded up by legislation to impose designations over the whole network without requiring public consultation at a local level, but it is doubtful this could be achieved by 2012.

Table 1: Assessment of options for managing electricity transmission activities

Criteria	Options that failed to satisfy the selection criteria					Preferred option
	Status quo NPS alone	Guidance	New Zealand standards	Call-in & Crown submission	Designations	Transmission activities NES
Minimise NPS implementation costs
National consistency		~	~		~
Provide for transmission activities	~	~	~
Take account of operational requirements	~	~	~	~
Manage environmental effects	~	~	~	~
Minimise RMA processing costs	~
Timeliness (available before 2012)

Key to table: Meets the criterion Does not meet the criterion   ~ Partly meets the criterion

Preferred Option

National environmental standards are legally enforceable regulations made under sections 43 and 44 of the RMA. Standards may be numerical limits, narrative statements, or methodologies. The national environmental standards (NES) for transmission activities would:

• apply to the operation, maintenance and upgrade of the existing electricity transmission network (transmission activities) but not to the construction of new lines
• specify that transmission activities that do not have significant adverse effects are permitted provided that specified terms and conditions to control environmental effects are complied with (listed by the type of activity associated with the particular effect)
• specify consent categories for activities which do not meet the permitted activity terms and conditions.

The NES would prevail over rules in plans related to transmission activities, and would operate as a stand-alone set of rules providing for transmission activities. It would mean that councils would not need to write rules on transmission activities to give effect to the NPS. The NES has been formulated to give effect to aspects of the NPS, and would be operative within 28 days of regulations being notified in the NZ Gazette.
As shown in table 1, the NES satisfies the selection criteria. The benefits of the NES arise from lower RMA costs associated with transmission activities. The reason for the reduction in costs and the way the NES satisfies the selection criteria are set out below:

• minimising the cost of implementing the NPS:
• the NES will provide a set of “rules” which take immediate effect without going through the plan change process. This will reduce council expenditure in formulating new transmission activities rules, assessing and hearing submissions on these rules, and dealing with appeals
• Transpower’s expenditure for submitting on plan changes will also reduce  
• providing a nationally consistent framework of consent requirements of consent requirements for transmission activities
• providing for the effective operation, maintenance, upgrading of the network by making a range of transmission activities permitted
• taking account of the operational requirements and technical constraints in determining the level of control on transmission activities
• managing the environmental effects of transmission by setting terms and conditions on permitted activities
• minimising RMA processing costs and delays:
• the NES will set out a detailed rule framework for transmission activities and reduce the complexity of consent processing.
• this will result in a reduction in Transpower and council costs of assessing consent requirements for a project, and reduce the costs associated with demonstrating that an activity is permitted (or an existing use).
• a reduction in costs for Transpower in obtaining resource consents (fewer consents required, and lower cost per consent), and a corresponding reduction in council non-recoverable costs of consent processing.
• initially (until the NES is incorporated into plans), no costs for certificates of compliance, as these are not available to confirm compliance with a NES, and subsequently lower costs as it will be easier to determine compliance with the NES provisions than with current plan provisions.
• be effective within the timeframes specified in the NPS. A NES could be in place by March 2009
• provide an intangible benefit to the community from greater certainty about which activities are permitted and which require consent (but this is likely to be balanced by community costs, see below)

The quantifiable costs identified with the NES occur within the first three years:

• Councils will incur implementation costs from becoming familiar with the NES provisions, and a small additional cost of notifying a plan change which includes the NES.
• Transpower will incur implementation costs through providing assistance to councils in understanding transmission activities – this will be a small cost in addition to the cost of assisting councils as part of the NPS implementation.
• Government will incur costs in providing guidance on the NES and assisting councils with implementation.
• Council and the community will incur intangible costs through finding out about the new requirements (first two to three years) and through loss of local control (ongoing).

Under the status quo, the community, councils and other agencies will incur costs, starting in 2008 and increasing through 2012, in becoming familiar with and implementing the NPS. The status quo is not simply a projection of historic costs, it is a projection of these new costs associated with the NPS.  

The intangible costs associated with the NES are likely to be small in relation to the tangible costs and benefits. It is likely that the costs associated with finding out about the NES will be very small. This is because under the status quo, most councils would notify new rules for transmission activities. The community would need to find out about the new rules, and this is likely to cost about the same as finding out about the NES. The Ministry for the Environment can assist in reducing search costs by providing good guidance for the public on the NES.

While the NES may take away some local controls, in general it is not removing controls on activities, it is making these more targeted by specifying the matters which councils have discretion over in making decisions on resource consent applications. With one or two exceptions (e.g. height increase of towers), the matters listed as permitted are currently permitted in the majority of plans.

The evaluation of the costs and benefits was informed by two reviews of district and regional plan provisions for transmission activities and an earlier appraisal of the draft NES undertaken by the New Zealand Institute of Economic Research. The results are shown in table 2. At a 10% discount rate, the net present value of the proposals is $4.4 million, with a benefit cost ration of 5.3 to one. Using a 5% discount rate the net present value is $5.5 million and the benefit cost ratio is 6 to one.
A sensitivity analysis was undertaken on four scenarios:

• 20% more (or fewer) councils incorporating the NES into plans via a public consultation process resulted in a 9.5% decrease (or increase) in the net present value (NPV)
• 20% decrease (or increase) in assumed level of Transpower activities, or 20% change in assumed benefits for same level of activity, resulted in a 14% decrease (or increase) in NPV
• a worst case of 20% more councils incorporating the NES into plans, and 20% decrease in assumed Transpower activity level, and 20% reduction in assumed benefits, resulted in a 38% reduction in NPV to approximately $2.7million.

The proposed standards are regulations, so will increase the stock of regulation. The NES would replace rules in plans which already have the effect of regulation. Compliance costs will reduce under the NES.

The Ministry has amended the proposals (contained in the discussion document released in October 2007) to take account of submitter concerns. In particular the proposals have been simplified to make them easier to use, for example:

• the Ministry has undertaken a review of plans to ensure that the standards do not generate additional resource consents
• the revised standards take better account of sensitive land uses, and includes requirements for electric and magnetic fields around transmission lines.

Local authority and Transpower representatives were involved in revising the standards.
For further details of amendments to reduce compliance costs, see the Consultation section below.

Table 2: Summary of costs and benefits

Potential risks and possible mitigation measures are set out in Table 3.

Table 3: potential risks and mitigation measures

Implementation and Review

National Environmental Standards are regulations under the RMA. Once final approval is given for the regulations, they will become effective within 28 days after being gazetted. The NES will be implemented by local authorities by noting in their plans which provisions have been superseded by the NES, or incorporating the NES provisions via a plan change. As noted above, local authorities must process plan changes to give effect to the NPS on electricity transmission, by 2012.

The NES implementation will become part of the wider implementation of the NPS, and will assist in reducing NPS implementation costs. Specific guidance material will be produced for local authorities to assist implementation. In addition to a users guide on the regulations, information will be provided on electricity transmission activities (with the assistance of Transpower), and guidance on amending plans to avoid conflict with the NES (in conjunction with Local Government New Zealand).

Local authorities will enforce the NES, which operates in the same way as rules in plans. The enforcement provisions of the RMA apply. It is envisaged that the effectiveness of the NES will be reviewed when the 5-yearly review of the NPS is undertaken.

Consultation

In January 2005 a Reference Group on Electricity Transmission was established to evaluate and advise on the merits and potential scope of national guidance on the management of electricity transmission under the RMA. The Reference Group was chaired by the Ministry of Economic Development and had representatives from relevant government departments, Business New Zealand, Local Government New Zealand, Transpower, Federated Farmers and the Electricity Commission. In December 2005 the Reference Group consulted on a draft report that evaluated a range of options for national guidance. As a result, two draft national environmental standards were prepared for further consultation.

In October 2007, a discussion document setting out proposals for national environmental standards (NES) for electricity transmission was released for public comment. During the submission period four public workshops were held in Auckland, Hamilton, Christchurch and Wellington. In addition, the Ministry for the Environment’s “Talk Environment Roadshow” travelled throughout New Zealand between 17 October and 2 November 2007. The Ministry visited 17 centres and facilitated 31 meetings with local government and the public. The meetings were attended by approximately 1,500 people, all of whom were made available a factsheet which included information about consultation on the proposed national environmental standards. Submissions closed on 30 November 2007.

A summary of the 84 submissions was published in April 2008. Responses from submitters were used to refine the proposals for national environmental standards for transmission activities, and will be used in preparing guidance on implementation of the standards.

One group of landowners opposed the standards on the basis that they will affect landowner amenity and allow Transpower increased access to private land. The standards do not do this, however the issue will be addressed in guidance material. The remainder of submitters supported the proposals for transmission activity standards, often subject to proposed modifications to make the standards more workable.

Twenty submitters noted that the standards would provide certainty to local authorities and Transpower, and contribute to security of electricity supply. Some submitters were concerned that while the proposals would benefit Transpower, there were no benefits to the environment or the community. The assessment of benefits and costs shows that councils also benefit from the proposed standards.

Submitters indicating conditional support or opposition to the standards were concerned about proposals to allow height increases to poles and towers as permitted activities. Submitters felt that the NES should take more account of the type of environment the infrastructure is located in (e.g. urban, rural, ecological area, protected landscape, historic heritage) when determining activity type. This has been addressed in part in revising the standards. A proposal to allow a 25% height increase to correct safety violations arising from third party activities has been withdrawn.

Many expressed concern that permitted activity conditions proposed were either too lenient or too stringent and would be likely to generate either adverse environmental effects or generate additional resource consents, particularly for minor discharges and work in the beds of lakes and rivers and the coastal marine area. Minor activities of this type have been included as permitted activities. Additional conditions have been added to control effects of some permitted activities. Several submitters thought that the NES should contain provisions relating to electric and magnetic fields from transmission lines, and these have been added.

Industry submitters pointed out that by specifying which transmission activities are to be permitted, any inadvertently left off the list (for example turning circuits on and off) would default to full discretionary status. A suggested solution was to specify that the inspection, operation, maintenance and minor upgrading of transmission lines is permitted, subject to a list of terms and conditions to control the effects.

A second set of standards was proposed to address the impacts of third party activities on the transmission network. These standards were opposed by the majority of submitters, mainly because of the costs they would impose on landowners. This proposed NES will be re-evaluated in light of the requirements to implement policies in the NPS relating to third party effects.
A selection of local authorities and Transpower representatives were invited to participate in the redrafting of the NES, and a range of government departments were invited to comment on an evaluation draft and Cabinet paper seeking policy approval for the NES.

Appendix 1: Basis of estimates of costs and benefits

Last updated: 6 May 2009