Energy Competition Task Force

This option supports the development of new intermittent generation, such as wind and solar. Access to firming (from flexible generation that can run at any time, such as hydro or gas peakers) enables developers to enter into power purchase agreements (PPAs) with large users and retailers that match their supply of electricity to their customers’ demand profile, and manage the risks of variable generation volume (eg, when the wind does not blow or the sun does not shine). The Authority will consider requiring gentailers to offer a minimum volume of flexible electricity in the form of long-duration contracts that could be used to firm new generators’ PPAs. A deeper and more active market for PPAs will enable more generation investment.

The Authority is facilitating the development of standardised flexibility products through the establishment of an industry co-design group. The Authority is also working on equivalent regulated products as a backstop. This work actions two recommendations from the Market Development Advisory Group. Flexibility contracts are a form of insurance product and provide the buyer with protection against high spot prices at specific times. They are important for retailers, and are expected to become more important as the proportion of intermittent generation, such as wind and solar, increases. Standardised flexibility products will provide the sector with more information about future electricity prices, which will support risk management and investment decisions. Ultimately, consumers will benefit from more efficient competition, which will put downwards pressure on pricing.

This option would design rules to require gentailers to offer a minimum volume of their flexible generation base to buyers in the form of risk management contracts. This option will be considered as a backstop if previous measures aimed at increasing the supply of firming contracts in the market don’t produce the intended uplift in competition. This is consistent with the Market Development Advisory Group’s recommendation 13. Although this is a backstop measure, designing the rules now will advance the work so it can be implemented quickly if needed.

The Task Force will investigate the pros and cons of various measures to ensure a level playing field between gentailers and independent retailers. It will help us understand what measures would be appropriate, the risks and possible triggers, and inform the development of a stronger regulatory response if other measures in this Task Force work package aren’t creating the change needed. Possible measures that will be investigated include non-discrimination rules, which would require generators to treat the retail arm of their operations the same as they treat other retailers.

Thanks to early input from stakeholders who have provided the following feedback to help ensure our level playing field measures work is comprehensive.

This option would see distributors pay a rebate when consumers export surplus energy back into the system at peak times. While this better rewards consumers who have invested in technologies – such as solar and battery systems – the benefits might be shared to all consumers in the long term through lower lines charges. This is because the electricity is generated locally when and where it’s needed, and eases pressure on the local distribution network where it’s constrained. This avoids the need for distributors to build more infrastructure to cope with higher demand peaks, meaning lower overall costs, and lower prices for consumers in the long run. This option would further incentivise investment in home solar and battery systems.

Time-of-use pricing allows households to get cheaper electricity by moving their electricity use to off-peak times. Although this is increasingly being offered by retailers, the Task Force will consider making it a requirement for retailers above a certain size to offer their customers. Time-of-use pricing gives households more ability to manage their electricity use and costs. Shifting a significant amount of electricity use to times when it is abundant and cheaper will reduce demand peaks. This means cheaper wholesale electricity costs that can flow through to lower prices for consumers.

This option would better reward consumers who can provide energy back into the system – most commonly through rooftop solar and batteries – at peak times. Currently many of the rates retailers offer to buy back energy from these households don’t reflect the value of that electricity at the time. This option may encourage more people to invest in solar and batteries, as well as reduce electricity bills for all consumers over time if it reduces the cost of peaking generation.

One of the ways to help manage our electricity supply is to lower demand at peak times. Industrial plants that use a lot of electricity can make a meaningful contribution to this by using less electricity when it’s scarce and expensive. The Task Force is considering measures that would enable industrials to be appropriately rewarded for the benefit their flexible electricity use brings to the system, freeing up more supply and reducing the need for more expensive electricity generation to manage peaks. This could also provide industrials with an additional revenue stream.

The Task Force has provided a range of ways for people to contribute to the Task Force programme, based on the specifics of each initiative. For some of the initiatives it has been useful to capture feedback and input early, for example our consultation in October/November on level playing field measures for initiative 1D. While fFor other initiatives, we need to do research before seeking feedback on possible solutions. We have an open-door approach and encourage people to contact us directly at taskforce@ea.govt.nz if there’s something they’d like to discuss.

We will consult on some initiatives in early 2025, and there will be opportunities during the consultation period to engage directly with Task Force staff and provide more detailed feedback. The estimated timelines for consultations are in the work programme above. Keep a look out on the Authority’s website for further details about consultation dates or sign up to the Authority’s Market Brief newsletter to receive direct notifications when these consultations open, and for other Task Force and Authority news.

The Task Force comprises representatives from the Electricity Authority and Commerce Commission, with staff from the Ministry of Business, Innovation and Employment as observers.

The Task Force will make recommendations to the Boards of the Commission and the Authority, as appropriate, for final decisions.

The Authority Board makes all decisions requiring Code changes, because the Authority is the only agency with the power to change or add to the Code. 

We are not suggesting industry make changes until decisions have been made. However, we do encourage market participants to consider what the proposals might mean for them and to share their feedback with the Task Force.

Where we are consulting, you can provide this information via the consultation process, alternatively you’re welcome to email us at taskforce@ea.govt.nz.

The two Packages are complementary - we see independent value in exploring initiatives under both Packages

Not at all - we want to hear a wide range of perspectives to help inform our work. Our door has always been, and remains, open to questions, suggestions and feedback from all interested parties.

We are keeping the Minister for Energy and Associate Minister for Energy informed of our work as it progresses.

Initiative 1C builds on an MDAG recommendation to design a targeted measure to address the concentration of control in the supply of flexibility products. We have drawn from MDAG’s model to develop 1C with some adjustments to reflect feedback from stakeholders, including the Electricity Authority’s Advisory Group.

We recognise the importance of having well defined triggers that are clearly linked to the problem the backstop measures are seeking to address. We are still developing proposed options for trigger tests.

The trigger test for 1C could consider open interest (the volume of active contracts that have been traded but not yet closed) alongside other indicators such as price, liquidity, number and type of active participants and ability to influence price.

For 1D, we expect the recent findings of the ‘Internal Transfer Price and Retail Gross Margin post implementation review’ and the current Risk Management Review consultation will provide important context when considering triggers for level playing field measures.

We are considering multiple options for how distributors' rebates pass-through should be determined, and we will be seeking feedback on these options in our consultation paper scheduled for release in February 2025.

We are considering multiple options for how distributors' rebates should be determined, if this proposal goes ahead. Under some of the options, distributors' rebates would reflect constraints on the network. Under other options, rebates would be set at a less granular level. We are seeking feedback on these options in a consultation paper that is expected to be released in February 2025.

Yes. A cost-reflective distribution injection tariff is one of the options being explored by the Task Force.

The Commerce Commission and the Electricity Authority are very aware of the cost pressures some households are facing. Both regulators recognise they have a role to play in an all-of-government approach to reducing energy hardship. Our respective work programmes are driving regulation to support smart investment that is efficient and reduces costs to consumers over time.

Where those with solar panels provide a service that benefits the energy system when needed at a particular time - and in doing so save money for consumers as a whole – we think it right they are rewarded. Those providing this service could in future, be communities or schools as well as particular households.

In addition, the Authority has specific work programmes underway to encourage more retail competition, such as improving comparison and switching services, to put downward pressure on prices.  The Authority’s Consumer Care Obligations will begin to come into effect from 1 January 2025, mandating key protections for consumers in New Zealand.

In addition to lowering costs for all consumers, more rooftop solar and batteries can improve the security of the national electricity supply as it can create a bigger buffer in the system when demand is high, and supply is tight.   

We recently undertook a survey of retailers that showed some of the largest retailers do not currently offer time-of-use pricing plans or only offer them to select customers.

Our view is that time-of-use pricing plans are a simple, yet effective way to provide consumers with more ability to manage their own electricity use and costs, and should be more widely available.

The Task Force has not yet determined what specific incentives to implement. However, we are open to what could work best in the New Zealand context, if needed, and welcome ideas from affected parties.

The Task Force is taking a broad approach to reviewing how industrial flexibility is offered into the market, and any potential solutions that are progressed. This includes a broad range of potential measures, some of which may be non-regulatory and may not require a formal consultation process.

We have indicated the likely timeframes of a consultation, without yet knowing if it’s needed, so interested parties are aware of this possibility. Even if formal consultation is not required, we will be having ongoing discussions with stakeholders throughout this process.

We are examining industrial demand response to determine whether our market settings need to change. A key part of this work is understanding what’s preventing wider uptake of existing incentives.

This Task Force initiative is being progressed in tandem with the Authority’s existing work to address some operational barriers to industrial demand response.

Addressing these barriers will make it easier for a broader range of consumers to participate in demand response. We recognise this will not address concerns from some consumers (particularly industrials) that avoiding high spot prices is an insufficient incentive to participate in these schemes. This issue is being looked at as part of initiative 2D.