Accountability in the retail and distribution sectors of the New Zealand electricity industry
Permanent link to Research Commons versionhttps://hdl.handle.net/10289/14787
Since the mid-1980s organisation of the electricity industry in New Zealand has been radically reformed. The public sector reforms implemented by successive governments between 1984 and 1999 aimed to reduce or eliminate government involvement in business activities and to create competition within industries, some of which might otherwise be natural monopolies. A “light-handed” regulatory regime was introduced to monitor and control the electricity industry. To date, this regime has rejected the use of price controls and associated methods in favour of market-based methods involving competition and transparent accountability. Corporate annual reports are therefore one of the prime ways in which organisations meet their accountability obligations. This research describes and explains the development of a disclosure index and the results of its application to the 1999 annual reports of the 33 electricity retail and distribution companies. The index was developed with the support of a panel representing 15 stakeholder groups. The disclosure index is a complex measure. It emphasises accountability through the provision of both financial and non-financial information to meet the needs of a wide range of stakeholders. It is designed to assess the comprehensiveness (both in extent and quality) of annual report disclosures. It also incorporates a best-practice model of annual reporting for electricity retail and distribution companies. The use of the disclosure index highlights an information gap between stakeholder expectations of information disclosure and the current level of disclosure in electricity company annual reports. Out of a maximum possible Index score of 100, the average score is 56 with a range from 15 to 72. Key areas of inadequate disclosure from an accountability perspective relate to performance measures (financial and non-financial), segmental information, asset valuation details, and cost of electricity purchased/generated. The research also identified a need for trust-owned companies to be as accountable as public companies. In this respect, copies of the annual report in its entirety should be available to interested parties on request. The concern is to make electricity companies and their activities more transparent by providing sufficient, understandable and easily accessible financial and non-financial information to allow stakeholders to fairly assess performance. The annual report is an appropriate vehicle for providing this information as it is a comprehensive document available to the public on a routine basis. Improved disclosure to meet best-practice levels would contribute significantly to the effective information sharing between companies and stakeholder groups - thus improving the accountability of each entity. Feedback from the research provides each company with indications of the parts of their reports which need attention if they wish to improve the quality of their reporting.
The University of Waikato
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