Work needed to successfully deliver electricity market outcomes

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Work needed to successfully deliver electricity market outcomes

3 Oct 2019 | BusinessNZ

The BusinessNZ Energy Council (BEC) welcomes the release of the Electricity Price Review Panel’s report (the ‘EPR’ report) and the Government’s response to it, but work is needed.

BEC supports a more competitive electricity market that delivers improved outcomes for all Kiwis.

The 13-month review investigated concerns about how prices are set within the electricity sector and whether its structure is contributing to the problem of energy affordability.

BEC Chair David Caygill says the EPR report provides a thorough review of options for improvement in electricity pricing including their priorities and the Government’s response is comprehensive.

The Government has agreed to a work programme that will see 20 of the Review’s recommendations progressed immediately.

The EPR report concluded that there are no obvious signs of excessive profits being taken by companies operating in the electricity sector, and that the sector’s structure is not a significant contributor to the issue of energy hardship, which remains a serious issue.

"We welcome the Government’s measured response to the EPR report. It is appropriate that the Electricity Authority be tasked with the delivery of many of them."

Mr Caygill warns some of the issues are not straightforward and could have outcomes that run counter to the Government’s desire to hold electricity prices down and reduce energy hardship.

"We will assess the Government’s actions against their likelihood of improving New Zealand’s Energy Trilemma performance of balancing energy security, affordability and environmental sustainability."

Incentives to invest and to create an affordable, secure electricity system do not come from the passing of laws or regulations, or from Government Policy Statements but from clear, predictable and stable regulatory and investment environments. Without these, the Government’s desire to transition smoothly to a low carbon future, supported by a growing role for renewable electricity might be more difficult.

Steps taken need to be mindful of wider factors outside of the electricity market, like implications of a tight gas market, the likely increase in carbon prices, uncertainty around the consenting of renewable electricity generation projects and water reforms, Mr Caygill says.

Overburdening the Electricity Commission with multiple and conflicting objectives led to the establishment of the Electricity Authority.

"Caution is required. Further work must identify a clear governance problem to be addressed and the outcome must be an institution independent of government if it is to retain the confidence of market participants.

"We look forward to working with the Government and the Electricity Authority as its recommendations are more fully developed and implemented."

Contact: Dane Ambler | Communications Advisor, BusinessNZ

Phone: +64 (0)20 4125 9838