Decision on improving Hedge Disclosure Obligations

We’ve decided to improve the Hedge Disclosure Obligations in subpart 5 of Part 13 of the Electricity Industry Participation Code 2010 (the Code).

The electricity sector is evolving, with more renewable generation and increased price volatility. Participants need a broader range of information to design effective risk management strategies in response to these challenges. Helping participants better manage risk will lead to more efficient prices for consumers – this is increasingly important with greater reliance on intermittent forms of generation in the future.

Improved transparency of hedge information also provides clearer price signals for investment decisions in electricity generation and storage, supporting the electrification of New Zealand.

The previous obligations provided limited transparency on new contract types and shapes, impeding participants’ ability to assess prices and negotiate contracts.

These amendments will improve transparency and competition in the contracts market for the long-term benefit of consumers, by helping to:

• broaden the scope of information collected and published on risk management contracts
• future proof the Code, anticipating and providing for the emergence of new types of risk management contracts
• update the Code to ensure it remains fit for purpose including in areas related to audit and confidentiality provisions.

We consulted with industry and stakeholders on the identified issues and the best ways to improve the hedge disclosure obligations to increase transparency in the contracts market. The updates incorporate feedback and changes suggested during the consultation process. We would like to thank all submitters who provided feedback on these amendments. Read our decision paper to find out about the reasons for our decision, our responses to submissions and the final Code drafting.

The Code amendments also align with the Market Development Advisory Group’s final report: Price discovery in a renewables-based electricity system, which recommends improving transparency of hedge information covering offers, bids and agreed prices. The Code amendments will address this recommendation in relation to hedge information that covers agreed price.

Disclosure of bids and offers are subject to the industry-led voluntary Code of Conduct established by the Over The Counter Electricity Market Working Group. We may revisit this decision in the future, depending on the uptake and effectiveness of the voluntary Code of Conduct.

We are publishing the decision paper in advance of the Code amendments coming into effect. Participants should use this time to understand how the changes will apply to them and any future risk management contracts they might enter into (such as PPAs, other long-term contracts and any relevant demand response contracts) and make necessary adjustments to their operational processes. Our intention is that the Code amendments will come into effect in October 2024.

The Code amendments will require variations to the hedge disclosure system, and we’re collaborating closely with NZX to ensure the hedge disclosure system is updated by the time the amendments come into effect.

Read our decision paper and check out the OTC market project page.