Wednesday, December 11, 2024

Terms of reference released for electricity market review

The terms of reference for a review of the performance of the electricity market have been released by the Government.

The review, which was initiated by the Coalition Government during the winter power crisis, will look at whether current regulations and market design support economic growth and access to reliable and affordable electricity.

Energy Minister, Simeon Brown said New Zealand’s economic growth and prosperity relies on Kiwi households and businesses having access to affordable and secure electricity at internationally competitive prices.

“Businesses must be able to invest and operate with the confidence that they will have internationally competitive energy and electricity prices. Households, schools and hospitals must be able to rely on an efficient and affordable system that won’t let them down when it matters most,” he said.

The review will address areas including investment and access to capital, market rules and competition, and market performance monitoring

“We know that electricity demand is expected to grow significantly as our economy continues to electrify, and we have already made significant progress in enabling investment in the generation, infrastructure, and resources we need to double New Zealand’s renewable electricity generation,” said Associate Energy Minister, Shane Jones.

The terms of reference set out how a secure and affordable electricity supply requires markets that:

  • Incentivise timely investment in infrastructure and resources to reliably meet current and future demand (by existing market participants and prospective new entrants);
  • Achieve efficient outcomes: considering productive, allocative and dynamic efficiency;
  • Are effectively competitive at wholesale and retail levels, ensuring entry is feasible and placing downward pressure on prices, so export businesses are globally competitive;
  • Have effective regulation in markets where competition is not possible;
  • Are regulated in a predictable and proportionate way, enabling participants and consumers to plan, invest and trade with confidence.

“The terms of reference released today set out how a secure and affordable electricity supply requires markets that incentivise timely investment in infrastructure, achieve efficient outcomes, are effectively competitive, and have effective regulation that enables participants and consumers to plan, invest, and trade with confidence,” Mr Jones says.

Mr Brown says the past winter brought into sharp focus the many challenges in the sector.

“We need to ensure our regulatory settings are effective at ensuring gentailers have the interests of New Zealanders front and centre.”

The review is expected to get under way early in the new year.

View the Terms of Reference for review of electricity market performance.pdf.

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