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Energy Competition Task Force

Investigating actions to strengthen the performance of the electricity market in the short- to medium-term, for the benefit of all consumers.

  • Consumers
  • Wholesale

    • Open consultation

    Rewarding industrial demand flexibility

    Submissions due by 26 June 2025

    View consultation

    Overview

    The Electricity Authority and Commerce Commission have jointly established the Energy Competition Task Force (Task Force) to investigate ways to improve the performance of the electricity market.

    The Task Force was established in response to the fuel shortage and period of sustained high wholesale prices in August 2024, in addition to the immediate steps we, and others, took to manage security of supply and bring prices down.

    The Task Force’s work programme focuses on two overarching outcomes:

    • enabling new generators and independent retailers to enter, and better compete in the market
    • providing more options for consumers.

    These outcomes will encourage more and faster investment in new electricity generation, boost competition, enable homes, businesses and industrials to better manage their own electricity use and costs, and put downward pressure on prices.

    The Task Force is considering both new initiatives and some that are already underway but can be accelerated so New Zealanders can benefit from a better performing electricity system sooner.

    Representatives from the Ministry of Business, Innovation and Employment will participate on the Task Force as observers.

    The Task Force’s recommendations will go to the Authority Board for final decisions. Any options that change market settings or regulations will follow the normal consultation processes.

    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.

    Work programme

    Energy Competition Task Force Work Programme

    Energy Competition Task Force Work Programme

    Package one

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

    This will encourage more and faster investment in new generation, which puts more energy into the system, strengthens resilience against future shortages and puts downward pressure on prices.

    1A. Consider requiring gentailers to offer firming for Power Purchase Agreements

    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 Electricity Authority considered 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 (an “allocation” approach). Based on feedback from a wide range of stakeholders we now believe that:

    • While access to firming is a key issue affecting investment in new power generation projects
    • An allocation approach is not the best way to address this issue, because it distorts market signals and incentives.

    We instead believe it is more effective to consider improved access to firming via the work on standardised flexibility products, the proposed level playing field measures (particularly the non-discrimination obligations) and complementary initiatives to encourage PPAs which will enable new investment without the risks associated with allocating firming volumes.

    View update paper

    1B. Introduce standardised flexibility products

    The Authority has facilitated the development of standardised flexibility products through an industry co-design group. The Group recommended a super peak product which will provide buyers with protection against high prices in morning and evening peaks. See the product specification sheet for details.

    Aotearoa Energy is facilitating voluntary trading in the products by running fortnightly trading events. The Authority is actively monitoring trading and publishing auction results.

    We have a flexibility hedge products dashboard to show prices and traded volumes of key types of flexibility products to help industry make operational and investment decisions.

    Standardised flexibility products will help all wholesale electricity buyers and sellers to manage their price risk while increased transparency of trading volumes and pricing will reduce transaction costs and assist purchasers in managing price risk and support investment in flexibility services.

    These are important for retailers, industrial consumers, and generators, and are expected to become more important as the proportion of intermittent generation, such as wind and solar, increases.

    With support from participants the expectation is that more efficient competition will benefit consumers by putting downwards pressure on prices.

    1C. Prepare for virtual disaggregation of the flexible generation base

    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.

    1D. Investigate level playing field measures such as non-discrimination rules as a regulatory backstop

    The Task Force has considered the pros and cons of various measures to ensure a level playing field between gentailers and independent retailers.

    We consulted on a proposal to introduce a new electricity industry rule called ‘mandatory non-discrimination obligations’ that the four large gentailers - Genesis, Contact, Meridian and Mercury – would have to follow.

    This new rule would prevent the gentailers from giving preferential treatment to their retail arms for hedge contracts. Instead, they would have to make these contracts available to all industry participants on effectively the same terms as they use when trading internally. This would ‘level the playing field’ so independent retailers and generators can better compete with the gentailers.

    View consultation

    Package two

    Provide more options for consumers. Initiatives 2A, 2B and 2C, as described below, have been updated to reflect proposals in the February 2025 consultation papers. Package Two initiatives being considered are:

    2A. Requiring distributors to pay a rebate when consumers supply electricity at peak times

    We propose requiring distributors to pay a rebate when consumers supply energy to the system when certain parts of their network are congested. Under this proposal, any rebate would be taken off distributors’ charges to retailers. Our proposals under Initiative 2C would complete the process by ensuring the rebates are shared with consumers through retailers’ buy-back pricing plans. We expect this would lead to lower costs for all consumers over the long term as less flexible generation and network investment would be required.

    This initiative aims to avoid 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 initiative would also further incentivise investment in home solar and battery systems.

    View consultation

    2B. Requiring more retailers to offer time-of-use pricing

    Time-of-use plans encourage consumers to shift their electricity use away from peak periods. We propose requiring all retailers above a certain size to offer these plans. When households and businesses intentionally shift their energy use to reduce demand at peak times, those consumers benefit through off-peak pricing and the electricity system benefits through reduced peak demand. This behaviour change also benefits all New Zealanders over time, as reduced demand on the system lowers the prices we all pay through our power bills.

    View consultation

    2C. Requiring large retailers to better reward consumers for supplying power

    We propose requiring all retailers above a certain size to offer variable buy-back rates to reflect the higher value of electricity supplied by consumers at peak times. This will fairly reward those consumers who have rooftop solar and batteries and will incentivise other consumers to make that investment.

    Electricity retailers already pay consumers for energy they supply into the electricity network, for example from rooftop solar systems. However, most retailers' buy-back rates do not reflect the changing value of electricity throughout the day. Only a small number of retailers currently offer variable buy-back rates.

    View consultation

    2D. Reward industrial consumers for providing short-term demand flexibility

    One of the ways to help manage our electricity supply is to lower demand at peak times. Industrial consumers 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 flexibility brings to the system, reducing the need for more expensive electricity generation to manage peaks and ensuring that supply continues to meet demand.

    The Electricity Authority is seeking feedback on a vision for industrial demand flexibility and a five-year roadmap of 11 actions to better incentivise short-term flexibility by industrials in the electricity market.

    View consultation

    Timeline

    Past activity

    FAQs

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    Project background

    New Zealand experienced a fuel shortage in August 2024 due to unexpected lower gas reserves, low hydro storage and rainfall, and low wind. The shortage led to very high wholesale prices, which affected those industrial business whose electricity costs were tied to the wholesale spot price.

    Regulators, the Government and industry took action to manage security of supply and help bring wholesale prices down. Households were generally not affected by the price spike as they pay retail prices set by their electricity retailer.

    The interventions and increased hydro storage caused wholesale prices to drop significantly by the end of the month. Although the event was rare, it highlighted the need to improve the electricity market’s performance and better bolster security of supply.

    The Authority is now working with the Commerce Commission to investigate ways to adjust regulatory settings to strengthen the electricity market.

    The Energy Competition Task Force, co-led by the Authority’s Chair Anna Kominik and the Commission’s Chair Dr John Small, brings together a number of sector and regulatory experts from both regulators. Representatives from the Ministry of Business, Innovation and Employment attend as observers.

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