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Enabling investment and innovation

Risk management review

Reviewing risk management options for electricity retailers.

Overview

An important enabler of retail competition is the availability of efficient risk management options for electricity retailers, especially for those retailers focused on domestic consumers and small business customers.

Effective competition in the retail electricity market is in the long-term interests of consumers, as it puts downward pressure on retail prices and encourages a greater variety of products and services.

We have been carrying out a review of risk management options for electricity retailers. This work has focused particularly on over-the-counter (OTC) risk management contracts, following on from the development of the voluntary OTC Code of Conduct.

The review has considered whether the current approach to pricing OTC contracts (including availability, shape and price), and other risk management options, is effectively creating a barrier to entry or expansion in the retail electricity market for retailers, and therefore harming competition.

At a glance: Risk management review info sheet

Modelling: Code and underlying data in the issues paper

Timeline

Past activity

Project background

Effective competition in the retail electricity market is in the long-term interests of consumers, as it puts downward pressure on retail prices and encourages a greater variety of products and services. This review focuses on the availability of efficient risk management options as an important enabler of retail market competition.

We are working to increase our understanding and the transparency of risk management options for electricity retailers. This review focuses on over-the-counter (OTC) risk management contracts, following on from the development of the voluntary OTC Code of Conduct. It considers whether the current approach to pricing OTC contracts (including availability, shape and price), and other risk management options, is effectively creating a barrier to entry or expansion in the retail electricity market for retailers, and therefore harming competition.

We are engaging with the Commerce Commission on this review, including drawing on their competition economics and investigation expertise.

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