2018-2019 Electricity Price Review
The 13-month review is complete and the Government has given its response. It investigated whether the current electricity market delivered a fair and equitable price to consumers. It also considered improvements to future-proof the sector and its governance structures.
Why the review was needed
In April 2018, the Minister of Energy and Resources commissioned an independent review into New Zealand’s electricity market. This was because electricity prices, especially for residential consumers, increased faster than inflation for many years, putting pressure on household budgets. In comparison, prices faced by commercial and industrial customers remained relatively flat.
Such reviews are not new. Since the 1970s, New Zealand has reviewed its electricity sector roughly every decade – each time substantial changes have been made to improve or correct the sector’s performance. In the 1980s and 1990s, the sector was privatised to improve commercial performance, and a light-handed regulatory regime was developed. By the 2000s, concerns about industry performance and self-governance arrangements resulted in further improvements being made, including developing new regulations and improving market competition to restrain retail prices to efficient levels.
However, the 2018-19 review was unique as it addressed the need for electricity prices to be fair and affordable, not just efficient or competitive. Another novel element was the review’s focus on the consumers’ point of view and their say in the direction of the sector.
This review also considered how to future-proof the sector and its governance structures to help ensure the electricity sector functions well during New Zealand’s transition away from carbon-based fuels – a consideration that will become increasingly important as electricity meets more of New Zealand’s energy needs, and as new technologies are adopted.
As energy production and consumption is such an integral part to New Zealand’s economy, this review was of great interest to the industry and the public.
The review process
The Minister of Energy and Resources commissioned an independent panel of experts to lead the review. Panel members were appointed by the Minister in April 2018.
We were tasked with establishing a project Secretariat to support the independent panel and their review. The Secretariat consisted of a project lead, several specialist policy advisors and specialist consultants. The Secretariat supported the panel by project managing the review, and undertaking research, policy analysis and stakeholder engagement at the direction of the panel.
The review was completed in two phases. The first phase focused on determining facts and building evidence of problems in the sector. The second phase focused on developing possible improvements to those problems.
The review took into account crossovers and linkages with existing and planned work, including:
- the Electricity Authority's work on transmission pricing
- the new Interim Climate Change Committee’s work on how to reach 100% renewable electricity by 2035
- the Productivity Commission's low emissions economy inquiry.
First phase of work – fact finding
The review’s first phase of work focused on determining facts and building evidence.
The review engaged with stakeholders, including the public, industry representatives, and consumer groups to gain a better understanding of the current electricity market. It also analysed billing data from providers, which focused on prices for different consumer groups.
The review released its First Report for Discussion on 11 September 2018, and a detailed Analysis of Retail Billing Data on 15 October 2018. The public was invited to submit their views on the first report and retail billing data analysis. Submissions closed in October 2018.
Second phase of work – developing improvements
The second phase of work focused on developing possible improvements to the electricity sector.
The review published an Options Paper on 20 February 2019, which set out 41 possible solutions to the problems discussed in its first report.
The public was invited to submit their views on these options through another round of stakeholder engagement in February – March 2019. Submissions closed on Friday 22 March 2019.
Final report and Government response
The final report was delivered to the Minister of Energy and Resources in May 2019. It contains 32 recommendations related to consumers, industry, and regulation and technology.
The Government announced its response to the Review in October 2019. Most of the recommendations can be progressed immediately. Some will need further investigation.
Stakeholder updates – letters from the Chair
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