The NZ Electricity Price Review – Options Paper released

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The New Zealand Government’s Electricity Pricing Review has just released an options paper looking at changes in a range of areas(https://www.mbie.govt.nz/have-your-say/electricity-price-review-options-paper/). It explores 41 options across the following broad themes:

  • strengthening the consumer voice;
  • reducing energy hardship;
  • increasing retail competition;
  • reinforcing wholesale market competition;
  • improving transmission and distribution;
  • improving the regulatory system;
  • preparing for a low-carbon future;

In this update I focus on those changes that have the potential to directly affect consumers.

Photo by Bethany Legg on Unsplash

By: Dr Drew, Compliance Quarter.
  1. Energy Hardship

It is proposed that mandatory minimum standards be introduced for retailers dealing with customers in payment difficulty/financial hardship. Currently, the standards are voluntary and there is significant inconsistency between retailers. While hardship policies have been prescribed in the Australian National Energy Retail Law (NERL) for a long time, similar concerns have prompted recent changes to hardship programs in Australia.[1]

In addition, to strengthen support for customers in hardship it is proposed that the following be established:

  • a network of community-level support services for vulnerable customers. This would support responsible energy use and be funded by an industry levy;
  • a fund to help households in energy hardship become more energy efficient;
  • extra financial support for customers in hardship;
  • a prohibition on prompt payment discounts.[2]
  1. Retail competition

Options proposed to support a more competitive retail environment include:

  • the requirement to provide information to customers on dispute resolution, usage and comparison websites;
  • a prohibition on win-backs;
  • mandatory market-making obligations for vertically integrated retailers to ensure the availability of sufficient hedge contracts for smaller retailers to manage their wholesale price risk.

Interestingly, the Review considered, but ultimately did not recommend price caps as an option. For the latest on the policy to introduce a default market offer in Australia see https://www.compliancequarter.com.au/aer-draft-determination-of-default-market-offer-prices/.

To read more about the Electricity Pricing Review go to https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resources/energy-consultations-and-reviews/electricity-price/. Submissions should be received by 12pm, Friday 22 March 2019.

[1] See https://www.aer.gov.au/communication/aer-publishes-draft-hardship-guideline.

[2] See https://www.aemc.gov.au/sites/default/files/2019-02/Rule%20change%20request_0.pdf for a recent proposal for the Commonwealth Government to prohibit a similar practice in Australia.

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