The review was ordered after shortages pushed up wholesale power prices last winter. File photo. Photo: 123RF
A global consultancy will lead the government's review of electricity markets, with a local firm offering advice and two groups of experts providing quality assurance.
Energy Minister Simon Watts has named Global consultancy Frontier Economics as the lead reviewer, with New Zealand-based Concept Consulting acting as an expert advisor to ensure it had "solid awareness and understanding of the New Zealand context".
Two groups - British company NERA Ltd, and four international experts led by James Bushnell - will also do peer reviews.
Prime Minister Christopher Luxon announced the review in August, saying his was a "government of action" after shortages pushed up wholesale power prices last winter - leading to multiple wood and paper mill closures.
An expert in December said the crisis had cost the country about $300 million, and households are being warned higher prices are likely again this year - and not just in wholesale.
Luxon and his ministers in August also announced:
- Faster reversal of the offshore oil and gas exploration ban
- Easing restrictions on lines companies owning generation
- Making it easier for a liquefied natural gas import facility to be built
- Ensuring access for gen-tailers to use
However, the plan was criticised by commentators for the long timeframes expected for any of the steps announced to have an effect.
Watts said the peer reviewers collectively "bring a wealth of experience, insight, and the fresh perspectives needed for this type of review" and would provide an "added layer of quality assurance and accuracy to ensure the review reports are robust and reliable".
"We expect to see market-led approaches to energy security throughout the transition, and we want to make sure the markets are performing effectively," he said.
"This review will help ensure our regulatory settings can deliver on the long-term interests of consumers, keep prices down for Kiwis and keep the lights on."
Associate Energy Minister Shane Jones said power shortages could not be allowed to stunt growth.
"We are a resourceful nation and our businesses have to be able to continue without worrying whether they can afford the power bill or having to choose between shutting down production or keeping staff."
Cabinet will make decisions on next steps after the final reports from the review are delivered, expected at the end of June - well into winter. A draft is expected within two months.
The reviewers' terms of reference include seven questions:
- How does business ownership, structure or design of markets affect incentives or opportunities to invest in generation, storage, transmission and distribution?
- Since 2017, how have developments in the gas market and government policies including the offshore oil and gas exploration ban affected the availability of hedge contracts?
- Can an expectation that major electricity users are sufficiently hedged for dry years encourage greater investment in generation?
- What is the impact of market design and market rules on competition, market entry and expansion?
- Do market participants have access to sufficient information (including gas and other fuel supply chain information) and risk management products to effectively manage risks?
- Do the regulator and system operator have the right roles and responsibilities to promote security of supply and affordable prices?
- How does our market monitoring and compliance enforcement system (roles and approach) compare with international best practice?
They will also been to assess market performance, review other recent reports, use evidence from public resources and international experience, and make recommendations on the top 10 most urgent and impactful actions for the government.
The public and stakeholders need not be consulted, but reviewers can test ideas.
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