Security of supply policy

Roles and responsibilities

The Electricity Industry Act 2010 requires:

• Transpower – as the system operator, to provide information and short to medium-term forecasting on all aspects of security of supply, and to manage supply emergencies
• Electricity Authority – as the body responsible for the Code, to specify the system operator’s security of supply functions and how they are to be performed and reported on
• Security and Reliability Council – to provide independent advice to the Electricity Authority on the performance of the electricity system, the performance of the system operator, and reliability of supply issues.

System operator's requirements

The Electricity Authority requires the system operator to produce, publish, implement and comply with a:

• security of supply forecasting and information policy (SOSFIP) which must specify the:
  • regular monitoring that the system operator will publish to illustrate how system assets are being used to manage security of supply
  • specify the annual reporting that the system operator will publish to assess whether security of supply standards are likely to be met for at least the next five years
• emergency management policy (EMP) that sets out the steps the system operator must take during an extended security of supply emergency
• system operator rolling outage plan (SOROP) that sets out the thresholds at which the system operator will implement rolling outages and the actions that the system operator and other industry participants must take in the event of rolling outages.

We can choose to approve or decline any SOSFIP, EMP or SOROP that the system operator puts forward.

Official conservation campaigns

An official conservation campaign is a period during which the system operator calls on New Zealanders to voluntarily reduce their electricity usage.

An official conservation campaign is required when the risk of electricity supply shortage (as assessed under the SOSFIP) exceeds 10% and is forecast to continue to do so for at least one week.

Official conservation campaigns may only be declared by the system operator. The system operator may declare an official conservation campaign in respect of the South Island only, or for all of New Zealand.

Customer compensation scheme

In conjunction with the system operator, the Authority regularly monitors and assesses the security of supply to ensure participants have the information and incentives needed for the electricity system to operate efficiently and help ensure the lights stay on.

The Electricity Industry Participation Code (the Code) requires electricity retailers to have a customer compensation scheme (CCS). The CCS requires retailers to pay their qualifying customers financial compensation for their reduction in electricity usage if the system operator has commenced an official compensation campaign (OCC). This compensation takes the form of a payment that must be at least the minimum weekly amount (MWA) per week.

Requiring retailers to offer compensation for their customers’ electricity savings during an reduces the likelihood of OCCs by:

1. incentivising retailers to manage spot price risk appropriately – through appropriate hedges – to avoid an OCC (and therefore avoid paying compensation); and
2. incentivising generators to invest in last-resort dry-year generation (to fulfil their hedge obligations); and

The minimum weekly amount has been increased to $12.00 per week from 1 August 2023. The Electricity Authority determines this payment and reviews it every three years.

Details about the customer compensation scheme are contained in subpart 4 to Part 9 of the Code. More information about the Authority’s review of the MWA can be found here.

More information

For questions or more information on the customer compensation scheme, email info@ea.govt.nz.

Rolling outages

Rolling outages are a last resort measure in which the system operator is required to plan and implement compulsory electricity outages in order to prevent a complete system failure.

The Electricity Authority requires the system operator to implement an official conservation campaign prior to rolling outages. If the voluntary savings of an official conservation campaign are insufficient, then compulsory savings in the form of rolling outages may be required.

In the event of catastrophic asset failure, it is possible that an official conservation campaign and rolling outages will be implemented simultaneously.

Security standards

The SOSFIP requires the system operator to produce an annual security of supply assessment.

For this assessment, the system operator must use the assumptions set out in the security standards assumptions document.

The system operator may use alternative assumptions, though it must always include an assessment against our assumptions.