The electricity market is failing consumers
Regulatory reform and greater competition required to address market shortcomings.
The Government’s proposed Winter Energy Reliability Obligation is an indication that New Zealand’s electricity market is failing consumers and not delivering the reliable, affordable outcomes consumers were promised.
Denise Lee, Chair of Entrust, majority owner of Vector, and representing more than 372,000 electricity customers in Auckland, says the Electricity Authority has been too cautious in addressing structural failings in the market, resulting in the need for Government intervention.
“Entrust supports applying the new obligations to the four large incumbent gentailers — Contact, Genesis, Mercury and Meridian as well as Tiwai Smelter, as these parties have the scale and market power to meaningfully address dry‑year risk.
“The obligation requires them to secure sufficient fuel or firm generation ahead of winter whenever there is a potential shortfall.
“The current system is failing to deliver reliability or affordability. Under‑investment in new and backup generation has left the country vulnerable to supply shortages and sharp price spikes during dry years.
Entrust says the electricity market appears to lurch from one energy crisis to the next, an unacceptable situation for a country with New Zealand’s natural resources.
“The result has been higher wholesale prices and annual increases in gentailer profits, which is not a good outcome for households, businesses, or the wider economy.”
Entrust considers dry‑year risk part of a broader competition problem in a market dominated by four large, incumbent gentailers.
“The market is being kept perennially tight,” says Ms Lee.
“We are seeing persistent under‑investment and generation capacity build occurring later than would be expected in a genuinely competitive market.
“Entrust welcomes Government initiatives to make generation investment easier and believes there should be a stronger focus on reducing barriers for smaller and independent generators.
“Entrust has consistently supported structural reform and easing restrictions on lines companies to promote a more competitive market.”
New Zealand has the natural resources to deliver reliable, affordable electricity and support energy‑intensive industries on the world stage, says Ms Lee.
“What’s needed now is a more mature regulatory framework and a more competitive market to ensure it happens.”