Our compliance strategy, framework and policies

Our approach to compliance

We work with industry participants and industry bodies to improve their awareness of obligations and support their understanding of the electricity market and how it benefits consumers. We publish case studies to improve practice and industry guidelines to guide participants on technical compliance obligations.

Our compliance team helps educate and improve the industry more generally, as lessons learned support our ongoing education of industry participants and help us to identify and resolve ongoing or systemic issues.

Industry participants are obliged to report breaches, but we also investigate issues and trends to identify breaches and their causes. See investigations and rulings.

Our compliance strategy

Our compliance strategy guides our compliance work to help us focus on the most serious and highest priority risks. The strategy sets out our compliance objectives, approach and the following guiding principles:

• Fairness - we expect our people to act with the highest levels of integrity, as set out in the Public Service Commission's Standards of Integrity and Conduct. Our interventions will be fair, impartial, responsible and trustworthy.

• Consistency - we aim to be consistent. This means we will generally take similar approaches in similar circumstances. This does not mean uniformity of decision-making. Each case is unique and must be handled as such.

• Timeliness - we will respond in an effective and timely manner in accordance with our legislative and organisational obligations.

• Transparency and openness - we are clear about our approach to compliance and how we make our decisions. Those affected by our decisions can ask questions and ask us to review our decisions. We will always be able to explain our actions and reconsider them in the light of new information.

• Targeted strategies for sub-sectors or types of participants/practices/equipment - from time to time, we will develop specific plans or programmes for specific parts of the electricity sector, possibly in conjunction with other agencies and/or with sector organisations and participants.
  Typically, these will be driven by our understanding of changes in risk profiles and the need to respond to problems with a more targeted approach than is provided by our general regulatory and compliance activities.

• Supporting good practice - our priority is to get the basics in place, and to focus on eliminating problems. We will, however, always be looking to explore ways of recognising excellence and promoting good practice.

• Our compliance interventions - we will select the right intervention for the job, based on the circumstances of the case.

Our compliance monitoring framework

Our compliance monitoring framework sets out how we monitor, investigate and enforce industry participants’ compliance with the Act, its Regulations and the Code.

We use a risk-based framework to help us decide where to focus our monitoring efforts and how to effectively allocate resources. The framework allows us to prioritise the areas we monitor based on the level of harm from non-compliance and the likelihood of undetected non-compliance occurring.

The high-priority areas for proactive compliance monitoring are:

• Trading conduct - conduct in relation to generators’ offers and ancillary service agents’ reserve offers.

• Reasonable and prudent system operator - system operator must carry out obligations to reasonable and prudent standard.

• AUFLS readiness - North Island connected asset owners must ensure AUFLS readiness and systems in place; South Island grid owner must ensure AUFLS readiness; Asset owners must test AUFLS systems.

• Wholesale market information disclosure - wholesale market information disclosure; disclosure of misleading, deceptive, or incorrect information; requirement to provide complete and accurate information.

• Risk management contract information disclosure - parties to risk management contracts required to submit information and must annually certify that information submitted was correct.

• Provision of internal transfer price information - provision of internal transfer price information to Electricity Authority.

• Distributor arm’s-length requirements - distributors must act at arm’s length in relation to distributed generation and retail that it owns.

• Grid emergency planning - participants must plan for a grid emergency.

Our enforcement policy

Our enforcement policy sets out how we approach breaches of the Code by industry participants and the Electricity Authority. It outlines our enforcement options, and the factors we take into account when deciding which enforcement option to use.

Our prosecution policy

Our prosecution policy sets out how we will exercise our discretion in relation to monitoring, investigating and enforcing compliance with the Act and its Regulations.

The prosecution policy is subject to, and must be read in conjunction with the Solicitor-General’s prosecution guidelines.

Our information gathering powers

We have the power to require certain information from industry participants as part of our monitoring, investigation and enforcement functions. We can conduct interviews and, in some situations under a warrant, may conduct a search.

Force majeure events

In a force majeure event, market operation service providers and ancillary service agents are exempt from obligations under the Code and Electricity Industry (Enforcement) Regulations 2010. Other industry participants do not have the benefit of the force majeure exemption. This is consistent with the position of force majeure in relation to the general law.

The following guidelines explain how we will consider breaches in a force majeure event.