A review of the sector was announced by the Government in August when Energy Minister Simeon Brown said New Zealand faced the “highest wholesale electricity prices of any of the countries we normally compare ourselves to”.
Details of that review were revealed on Friday, though it’s not expected to begin until early next year.
The terms of reference say the review will advise how the current market structure, design and rules affect market performance. It will look at options to improve performance in line with the Government’s expectations that the markets “deliver reliable electricity at lowest possible cost to consumers, including for businesses that compete globally”.
A “secure and affordable electricity supply” would require markets that:
Incentivise timely investment in infrastructure and resources to reliably meet current and future demand (by existing market participants and prospective new entrants).
Achieve efficient outcomes: considering productive, allocative and dynamic efficiency.
Are effectively competitive at wholesale and retail levels, ensuring entry is feasible and placing downward pressure on prices, so export businesses are globally competitive.
Have effective regulation in markets where competition is not possible.
Are regulated in a predictable and proportionate way, enabling participants and consumers to plan, invest and trade with confidence.
The review will identify and explore improvements to current arrangements, including any possible alternative models or designs.
Among the matters to be considered are how market rules affect competition or the ability of providers to enter the market, as well as how the ban on new offshore oil and gas exploration – since overturned – impacted the availability of hedge contracts.
“The review is not expected to consult the public or stakeholders on its findings or recommendations but may test preliminary views with target stakeholders and must provide MBIE and ministers [with] an opportunity to comment on a draft report. The review should engage with regulatory agencies on any draft recommendations for them to implement.”
Energy Minister Simeon Brown. Photo / Mark Mitchell
Brown said on Friday that regulatory settings needed to be “effective at ensuring gentailers have the interests of New Zealanders front and centre”.
“New Zealand’s economic growth and prosperity relies on Kiwi households and businesses having access to affordable and secure electricity at internationally competitive prices.
“Businesses must be able to invest and operate with the confidence that they will have internationally competitive energy and electricity prices. Households, schools and hospitals must be able to rely on an efficient and affordable system that won’t let them down when it matters most.”
“The gentailers no longer operate in New Zealand in a way that enhances competitiveness, number one,” he told RNZ.
“Number two, the gentailers no longer operate in a vein that boosts or gives greater primacy to the greater interests. Therefore, there are provisions under the existing electricity legislation that enable the Crown to use a code of conduct which has legal force to change their behaviour.”
“There is no point maintaining an electrical authority, which is a key regulator, if it’s unwilling to flex its muscle or use the full powers in the legislation,” Jones said.
“If they don’t, then they’ll find they’ll be something akin to roadkill because we’re not going to tolerate Kiwis going broke, while a tiny caste of New Zealanders who have the privilege of owning shares and leading corporate New Zealand profit.”
Along with the move to reinstate exploration of offshore oil and gas, the Government has announced several steps to address energy security. That has included committing to removing barriers to the construction of Liquefied Natural Gas (LNG) facilities and easing restrictions on electricity lines companies owning generation plants.
