Energy Competition Task Force considers eight actions to strengthen electricity market

An outline of the work programme of the newly established Energy Competition Task Force has been released, showing the areas where the sector’s two regulators are considering options to strengthen New Zealand’s electricity market.

The Task Force brings together regulatory and competition experts from the Commerce Commission Te Komihana Tauhokohoko and Electricity Authority Te Mana Hiko, with representatives from the Ministry of Business, Innovation and Employment as observers.

It has two packages of work that collectively aim to encourage investment in new generation, bolster competition and provide more opportunities for consumers to manage their own electricity use and costs. The Task Force expects its work programme will flex as evidence emerges on the potential impacts of different options, including through engagement. The eight options described below may be modified or augmented with other measures as the work progresses to ensure the best outcomes for consumers.

Enabling new generators and independent retailers to enter, and better compete in the market

Commerce Commission Chair Dr John Small said the events of last month’s fuel shortage highlighted the need to accelerate work that enables new generators and independent retailers to enter and better compete in the market, something he said the first work programme is looking to address.

“The Task Force has two packages of work. The first one is focused on bringing in new competitors, including to build new generation faster to strengthen security of supply,” he said.

“We are investigating whether wholesale contracting arrangements can be improved to better support new solar and wind generation investment. There are several options under consideration here, some of which have already been flagged by an advisory group. Enabling a wider range of market participants should promote investment and competition, which should lead to lower average prices for consumers and greater energy security.

“We are considering trade-offs between options – including whether some are best left as backstops or implemented sooner – to ensure we are promoting competition as quickly and effectively as possible. We will be releasing more details on these options shortly,” he said.

Providing more options for end-users of electricity

Electricity Authority Chair Anna Kominik said the second package of work focuses on regulatory changes that give consumers more options to manage their electricity use and participate in the market.

“The electricity system is changing, and technologies and new systems are becoming increasingly available to consumers – big and small – empowering them to take greater control over their electricity use. In the first instance, this allows them to lower their power bills, but it can lead to wider benefits to all consumers in the long term.

“We want to better reward these consumers, and in doing so, encourage greater uptake of things like time-of-use pricing plans, rooftop solar and batteries, and demand response by industrial firms.

“For example, the Task Force is considering different options for rebating value when consumers export surplus power using rooftop solar and batteries or reduce their energy usage during peak times. This may reduce congestion on distributors’ networks. Where this occurs, it can help distributors avoid investing in more network infrastructure over time to cope with higher demand peaks, which lowers overall system costs that get passed onto consumers.

“We’re serious about creating change. The Task Force is also investigating stronger measures to have at hand if the other initiatives aren’t prompting the level of change needed,” she said.

Work on both of these packages is underway as a priority, and the Task Force will present advice to boards of both regulators over the coming months. Initiatives that propose developing or amending market settings or regulations will go through the usual public consultation process to ensure stakeholders have a chance to have their say.

Energy Competition Task Force work programme

The Task Force is investigating the following eight initiatives. It will present advice to the boards of the Commission and Authority for final decisions.

Package 1 – Enable new generators and new retailers to enter, and better compete in the market

• Consider requiring gentailers to offer firming for Power Purchase Agreements
• Introduce standardised flexibility products
• Prepare for virtual disaggregation of the flexible generation base as a backstop measure
• Investigate level playing field measures such as requiring gentailers to treat the retail arm of their business the same as they treat other retailers (‘non-discrimination rules’), as a backstop, which could be promptly deployed if other interventions are not effective.

Package 2 – Provide more options for end-users of electricity, options being considered include:

• Requiring distributors to pay rebates when consumers export at peak times
• Requiring all retailers to offer time of use pricing
• Requiring retailers to better reward consumers for supplying power by offering prices that reflect the value of the electricity at the time they supply it (eg, at peak times)
• Appropriately rewarding industrial consumers for the benefit their short-term demand flexibility brings to the system.

Visit www.ea.govt.nz/taskforce for more details on these measures.