The Energy Competition Task Force (the Task Force) has announced non-discrimination measures are its preferred way to level the playing field between the four large gentailers – Genesis, Contact, Meridian and Mercury – and independent participants in the electricity market. Levelling the playing field would give all participants equal access to electricity hedge contracts, to increase competition and ultimately give consumers more choices and lower power prices.
The proposed non-discrimination measures would prevent the generator-retailers (the gentailers) from giving preferential treatment to their retail arms in relation to hedge contracts. Instead, gentailers would have to make these products available to all industry participants on effectively the same terms as they use when trading internally and provide greater transparency about the prices and volumes provided to the retail sides of their businesses. This gives the Authority the ability to take action if monitoring shows evidence of unfair treatment.
Electricity Authority Te Mana Hiko Chair and Task Force member Anna Kominik says the Authority's current view is that the proposed mandatory non-discrimination obligations are the quickest and most effective way to improve competition and, depending on feedback, should be swiftly implemented.
"In our view, the new rules we're proposing will effectively ensure fair treatment for participants, boost competition now and in the future, and give consumers lower prices, better services and more choice of power provider. And unlike other options we considered, they can be implemented in months rather than years."
"Our current thinking is that it's important to introduce new non-discrimination obligations as soon as possible, to ensure all participants can compete on equal terms. This will give new players and investors confidence to enter the market, support development of new products and services, and put downward pressure on prices. While evidence that gentailers are using market power is not well defined, industry consultation has not yielded any evidence to contradict our view that the status-quo may be stifling competition."
"We are proposing a progressive approach, introducing non-discrimination obligations now, with the option of introducing more prescriptive ways of levelling the playing field if required."
The Electricity Authority is now seeking feedback on an options paper [insert link] that sets out the proposed approach to introducing these new obligations.
Commerce Commission Chair and Task Force member, Dr John Small says the Task Force is committed to taking pragmatic and sensible actions to improve outcomes for consumers.
"The level playing field measures are designed to work alongside other Task Force initiatives to promote investment in renewable energy and innovation, while improving resilience, affordability and accessibility for electricity consumers."
"We expect the proposed non-discrimination obligations, if implemented, would help ensure all retailers and generators have fair access to flexible generation backed products, particularly for morning and evening periods when consumer demand is highest."
"The proposed measures deliberately balance the significant long-term benefits of promoting competition with the nearer-term risks of direct market intervention – for example, the risk that investment slows due to uncertainty about the rules," said Small.
The Authority invites feedback from industry and consumers on these proposals through the eight-week consultation period, which closes at 5pm on Wednesday 23 April.
Visit the Task Force webpage
