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Monitoring, compliance and enforcement

Review of wholesale market competition

A review into competition in the wholesale electricity market after sustained high electricity prices.

  • Wholesale
  • Prices

    • Overview

    There were two phases to our review of competition in the wholesale market:

    • Phase 1 – A review of competition in the wholesale market between January 2019 to June 2021 – completed October 2021.
    • Phase 2 – A forward-looking assessment of what changes may be required to market settings to promote competition for the long-term benefit of consumers – completed May 2023.

    Inefficient price discrimination

    During Phase 1, we identified one clear and pressing issue. It was the potential for distortions in the wholesale market from large contracts for the supply of electricity at prices that might be inefficient. We quickly published an issues paper to gather stakeholder feedback to help understand how to best address this issue.

    Following our consultation, we made an urgent amendment to the Code in August 2022 to prohibit generators from giving effect to contracts of net 150 MW or more, unless certain conditions are met. A permanent Code amendment took effect from 19 May 2023.

    Latest activity

    We have completed Phase 2 of this project. At the end of 2022, we consulted on how to promote competition in the wholesale market. We shared our findings and decision in May 2023.

    Timeline

    Past activity

    Factsheets

    Competition in the wholesale electricity market - phase 2 factsheet

    Competition in the wholesale electricity market - phase 2 factsheet

    31 October 2022
    Competition in the wholesale electricity market - phase 1 factsheet

    Competition in the wholesale electricity market - phase 1 factsheet

    27 October 2021

    Correspondence

    Project background

    In a competitive market, the wholesale electricity price largely reflects underlying supply and demand conditions. For example the:

    • quantity of water in hydro lakes (including stored water) for hydro generation
    • quantity of electricity consumed
    • availability of gas
    • cost of fuel, including the price of carbon emissions.

    These factors help determine the price that generators offer, and in doing so, it signals the cost of electricity in New Zealand at any one time.

    There was a sustained period of elevated electricity prices after an unplanned outage at the Pohokura gas facility in Spring 2018. In January 2021, there was an announcement to extend the operation of the New Zealand Aluminium Smelter at Tiwai by four more years.

    In March 2021, we decided to start a review into competition in the wholesale electricity market after sustained high electricity prices since Spring 2018.

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