The Electricity Authority plans to publish a review of the electricity market at the end of October
Large electricity users have defined their expectations as to the results they want to obtain from the Electricity Authority.
Electricity users should know at the end of October how far the Electricity Authority proposes to go in recommending changes to the electricity market.
The authority said in an update on Tuesday that it planned to release the results of its review of the wholesale electricity market after its board considered a concept paper “exploring possible policy options” next month.
The group of large electricity users had previously stepped up pressure on the authority to ensure that the long-awaited review ended up lowering electricity prices.
While the EA should not consider scrapping the current model of the electricity market, debates over the future of the sector have slowly escalated this year amid a huge surge in wholesale prices for electricity. electricity and weakening retail competition.
* Big companies put a knife to the electricity market by saying Meridian made a surplus profit of $ 3.5 billion
* Flick Electric stops taking new customers into the competition for electricity
* “Premature” to say if Meridian, $ 13 billion, could be forced to divest assets
* Energy Minister Megan Woods fears high electricity prices ‘persist’
* Fonterra asks the Electricity Authority to toughen regulatory measures
There is speculation that the authority will suggest measures – aside from fundamental reforms – to reduce the market power of the main gentailers and that it could demand that Meridian Energy divest some of its power plants.
Energy Minister Megan Woods did not decide to go any further by structurally separating the main gentailers into separate production and retail businesses, but said in April that was not on her agenda. working at the time.
Major Electricity Users Group (MEUG) chairman John Harbord said he was seeking approval to deliver three outcomes, including electricity prices that “more closely reflect the cost of supply.”
“We need a sustainable, accessible and affordable electricity sector, especially as we move to a low-emission future,” he said.
“MEUG’s view is that the current market parameters and regulations have not achieved this goal.”
The group represents large, powerful users, including Fonterra, NZ Steel and Rio Tinto, as well as commercial organizations such as BusinessNZ.
Stats NZ said earlier this month that the price paid for electricity, gas, water and waste management services rose 32% to a record $ 1.7 billion in three month to end of June, mainly due to high electricity prices.
Large utilities have so far been able to protect their own retail consumers from higher prices thanks to their internal economy, with the burden of higher wholesale prices falling mainly on industrial users and independent retailers. .
Independent retailer ElectricKiwi has announced that it is increasing its average prices by 6.1%.
General manager Luke Blincoe said higher wholesale prices gave him no choice.
“We’ve delayed as long as possible by not taking on new customers, but the reality is that with every month that goes by with high wholesale costs, part of your cover book is disappearing and we have to hedge back at those prices. students. “
The company said in a letter to customers that it believes market power is “being abused to manipulate the wholesale market.”
Flick Electric also stopped accepting new customers in July, citing similar concerns.
Harbord said many of its members lack confidence in the wholesale electricity market and that the “poor performance” is putting jobs at risk and undermining investment.
MEUG separately expected the Electricity Authority to shed light on whether the planned investments by utilities in the new generation were sufficient to increase supply relative to demand. expected, he said.
Many new investments have been announced, but if this delays the growth in demand and the phase-out of thermal generation, “we will continue to see unaffordable prices,” he said.
The group’s third request is “a closer look at what is happening in the market, so consumers can have more confidence that they are being charged fair prices.”
MEUG commissioned a study from financial adviser Ireland Wallace & Associates which concluded last month that the country’s largest electricity company, Meridian Energy, had made $ 3.5 billion in excess profits over the past 20 years. , including nearly $ 2 billion over the past five years.
Harbord said he plans to launch similar studies on other generators, unless he is satisfied the authority has rigorously considered the issue in its review.
Meridian commissioned his own report from consultant PWC, who said he was achieving much lower returns than calculated by the MEUG-sponsored study.
Disagreements over corporate performance are not uncommon.
Countdown, for example, challenged a finding by the Trade Commission that it is making excessive profits.
The Electricity Authority said its board this month reviewed a position paper setting out its observations on the market, which it will release alongside its concept paper next month.
He will then seek the views of interested parties on the two documents.
Market policy manager Andrew Doube has made it clear that the authority will not share any information from the review on any recommendations or planned actions by the EA, whether final or preliminary, with key gentailers. before the documents are publicly released.