Declare Power Situation An Emergency

The Market Surveillance Committee (MSC) must declare an “undesirable situation” in the electricity sector under its emergency powers and take over temporary control of the market, according to the Major Electricity Users Group (MEUG).

Terrence Currie, Chairman of MEUG, said the current crisis was due to a deep-seated market failure, now exacerbated by low hydro inflows and “insanely high” prices.

“The market is too deeply flawed to manage itself out of these extreme conditions.

“It needs a managed market to maximize supply and minimize demand, to reduce the impact on New Zealand’s economy.

“The MSC can declare that an “undesirable situation” exists and step in to fix the problem. The contingency rules were drafted in case circumstances occurred which were beyond the power of the market to deal with. We have that situation right now,” Mr Currie said.

Under New Zealand Electricity Market rules (Rule 2.36), the MSC “may take whatever steps it considers appropriate to correct the situation” in an environment it has declared “undesirable”, or simply if ordered to do so by a “regulatory authority”.

“Running out of water, combined with high prices that are closing down production, is without doubt an undesirable situation. “If we had a more competitive market, we might not have reached this crisis, but the existing market is clearly incapable of dealing with the situation.

“Consumer conservation measures will help reduce demand and extend the amount of time we can hold out in hope for rain and ice melt, but the fundamental market flaws will remain unresolved.

“We are looking to the second summit tomorrow to address these issues in addition to the conservation measures,” Mr Currie said.

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