Level Playing Field Principles A Step In The Right Direction For Increasing Competition, But Clear Rules Needed

Octopus Energy welcomes the Electricity Authority's acknowledgement that the current market structure has created a real barrier to competition and investment in new generation.The principles proposed are core to effective competition.

New Zealand's ongoing energy crisis and lack of competition has led to under investment in generation.* Now, poor security of supply and high prices are hitting households and businesses.**

“Poor competition is leading to hefty bill increases and poor security of supply. The changes proposed today will be welcome news for consumers. It’s the start of action that is needed to get competition working more effectively and bring investment in generation and smart retailing, driving down the cost of electricity for households and businesses,” says Margaret Cooney, Chief Operating Officer Octopus Energy NZ.

“We’re really pleased to see these principles. They are central to effective competition, but they need to be supplemented with clear rules. This will make it easier for firms to comply and the Electricity Authority to monitor compliance. Otherwise we risk ending up in a blurry mess with big legal fees.

“Integrated firms should be allowed to own both retail and generation businesses. But these should be operated as separate legal entities. This would make their activities more transparent and easier to monitor.

"Let's make 2025 the year for meaningful electricity market reform that turns the sector from an economic handbrake into a driver of growth," says Margaret Cooney.

Notes:

Draft proposed non-discrimination principles are:

Principle 1: A gentailer must not discriminate against buyers in favour of its own internal business units, or between buyers, for the supply of (and in relation to the price and non-price terms of) risk management contracts without a cost-based, objectively justifiable reason.

Principle 2: A gentailer must establish an economically meaningful portfolio of internal transfer prices that reflects its internally traded hedges to demonstrate it has met its non-discrimination obligations.

Principle 3: Credit terms and collateral arrangements must reflect an objective assessment of the risk of trading with a buyer.

Principle 4: A gentailer must ensure that any commercial information relating to risk management contracts made available to its internal business units is also made available to any buyers.

Principle 5: A gentailer must protect buyer confidential information and not disclose this information to any internal business units that compete with the buyer.

Principle 6: A gentailer must establish, maintain, keep and disclose records that demonstrate its compliance with these non-discrimination principles.

*Boston Consulting Group, The Future is Electric (2022)

** ASX prices this winter are $350+ and prices out to 2028 are averaging $185-210.

© Scoop Media