Photo: 123RF
The big four electricity producers are to be required to offer power on the wholesale market to independent retailers to level the playing field and improve competition.
Sector regulator, the Electricity Authority, said it would make changes to come into effect by the middle of next year, to restore confidence in the wholesale market.
The four major generator-retailers – Contact, Genesis, Mercury, and Meridian – control about 80 percent of generation and have been accused of controlling power supplies to maximise prices to their own advantage.
Authority chair Anna Kominik said confidence was needed to sustain retail competition and affordable power prices.
“We are concerned that aspects of the wholesale market may be eroding the confidence required for independent players to compete, and we are acting to address these concerns.”
Three competition interventions
The Authority has proposed three measures:
Gentailers would be required to trade minimum volumes of the new wholesale electricity hedge product introduced in January to help independent participants manage their risk.
Mandatory obligations on the four large gentailers to ensure they do not treat independent retailers differently to their own retail businesses in the pricing of hedging (insurance) products.
A review of how the electricity futures market operates to ensure it promotes healthy competition and transparency.
The measures aim to make sure that independent retailers have access to what are called “shaped-hedging” contracts – a form of insurance to allow hedging against price spikes when demand surges or supplies are short.
The issue of providing such hedges was an issue for the Commerce Commission when it considered the takeover of Manawa Energy by Contact earlier this year.
The changes have been developed by the Energy Competition Task Force, established in August last year in response to the winter power crisis. The new non-discrimination rule will be consulted on later this year.
Commerce Commission Chair and Task Force member John Small said the aim was to promote competition in the sector.
“Combined they increase transparency for market participants transacting with the gentailers and improve access to the wholesale electricity contracts they need.”
The planned ‘interventions’ are the latest moves by sector regulators to loosen the grip of the big four on the electricity market.
Small said the new measures would also give new players and investors the confidence to enter the market and encourage the development of innovative new products and services.
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