Energy markets regulatory system

This page describes the energy markets regulatory system, its objectives and our qualitative assessment of it. It also lists the main statutes and changes to regulation either planned or in progress.

System description and objectives

The energy markets regulatory system provides for the effective and efficient operation of energy markets by regulating the allocation of, access to, and standards applying to energy resources and infrastructure in New Zealand.

The system comprises the institutions and legislation governing the production and supply of energy and related services, particularly electricity, natural gas, and liquid fuels. 

The energy markets regulatory system excludes aspects of energy sector legislation relating to electricity and gas safety, and monitoring and enforcing petrol and diesel quality standards. Those matters are included in the health and safety at work regulatory system and the consumer and commercial regulatory system respectively.

The key objective of this system is to promote competition and outcomes consistent with workable competitive markets. This objective is shared with the competition regulatory system. The system also has objectives relating to reliability and security of supply, access, energy efficiency and renewable energy.

Ministerial portfolio and key statutes

Portfolio Key statutes

Energy and Resources(external link)

  • Electricity Act 1992
  • Electricity Industry Act 2010
  • Energy Companies Act 1992
  • Energy Efficiency and Conservation Act 2000
  • Energy (Fuels, Levies, and References) Act 1989
  • Energy Resources Levy Act 1976
    Gas Act 1992
  • International Energy Agreement Act 1976
  • Petroleum Demand Restraint Act 1981

Regulatory agencies and their roles

Agency Role

MBIE

MBIE is the steward of this system and leads system strategy and policy advice.

MBIE collects and publishes a range of energy statistics, including supply and demand by fuel types, energy balance tables, pricing information, international comparisons and greenhouse gas emissions. These are used to monitor energy markets (e.g. identifying trends and issues) and inform related work programmes.

Electricity Authority

The Electricity Authority is an independent Crown entity responsible for overseeing and regulating the New Zealand electricity market. The Electricity Authority regulates the electricity market by developing and setting the market rules, enforcing and administering them and monitoring the market’s performance.

Gas Industry Company

 

The Gas Industry Company Limited was established in 2004 as the ‘industry body’ under Part 4A of the Gas Act 1992. The Company’s role as the industry body and co-regulator is to:

  • develop arrangements, including regulations where appropriate, which improve the operation of gas markets, access to infrastructure, and consumer outcomes
  • develop these arrangements with the principal objective to ensure that gas is delivered to existing and new customers in a safe, efficient, reliable, fair and environmentally sustainable manner and
  • oversee compliance with, and review, such arrangements.

Energy Efficiency and Conservation Authority (EECA)

EECA is responsible for improving the energy efficiency of New Zealand homes, vehicle fleets and businesses, and encouraging the uptake of renewable energy.

Commerce Commission

The Commerce Commission is responsible for enforcing laws relating to competition, fair trading, and consumer credit contracts. Its regulatory responsibilities in the energy markets regulatory system include the electricity lines and gas pipelines sectors.

Collaboration and information-sharing between regulatory agencies

The Council of Energy Regulators meets approximately quarterly and is a forum for MBIE, the Electricity Authority, Commerce Commission and Gas Industry Company to share information and discuss matters of common interest.

MBIE meets regularly with each of the other agencies in the system to share information and monitor progress of relevant work programmes. MBIE has memorandums of understanding (MOUs) with the Electricity Authority [PDF, 1.1 MB] and the Energy Efficiency and Conservation Authority. The MOUs explicitly identify matters of common interest where there are potential overlaps in the respective roles of the agencies and provide a framework for the agencies to coordinate and collaborate on the work.

Some of the agencies also have regular bilateral meetings at board and staff levels to keep each other informed of relevant work programmes, priorities and issues or risks. In addition, the Electricity Authority and Gas Industry Company each have an MOU with the Commerce Commission setting out how they will work with one another on matters of common interest.

Joint working groups are also used to coordinate and/or progress activities in which two or more agencies have an interest. Agencies may share some data when working on joint projects.

Regulated parties and main stakeholders

Regulated parties include:

  • electricity generators and network operators
  • gas pipeline operators and sellers
  • fuel suppliers
  • suppliers of some appliances.

Other key stakeholders include consumer representatives like:

  • the Board of Airline Representatives
  • the Major Electricity Users Group
  • Consumer NZ
  • Business NZ
  • the Automobile Association.

Processes for engagement with regulated parties and stakeholders

The Electricity Authority and Commerce Commission have regular stakeholder events, conferences, seminars, workshops and meetings.

Agencies routinely consult with stakeholders on their priorities, work programmes and specific regulatory proposals.

MBIE also develops specific engagement plans when we are planning public consultations on policy proposals. Each plan includes a customised approach to engaging with iwi, which may involve seeking written feedback and/or hui, depending on the nature of the policy proposals and the level of interest iwi may have in those proposals.

System's fitness for purpose

Effectiveness

System has significant issues against criteria

Regulation of gas and electricity supply is considered reasonably effective. New Zealand typically ranks well in international comparisons, such as the World Energy Council’s Energy Trilemma Index (NZ ranked 10th out of 130 countries in 2016). This outcome is consistent with findings from the 2015 competition regulatory system assessment, which covered the electricity and gas regulatory sub-system.

In contrast, performance of the unregulated liquid fuels markets is more difficult to gauge with confidence due to limited availability of information. Further analysis of these markets is underway.

Efficiency

System performing well against criteria

The regulatory agencies are transparent about the costs and benefits of their activities and routinely seek feedback from stakeholders on their priorities, work plans and budgets (all regulatory activities in the system are funded by industry levies which are consulted on).

The extensive use of technical working groups and workshops promotes efficiency by leveraging stakeholders’ skills and knowledge.

The development of minimum energy performance standards benefits from a joint work programme with Australian governments.

Resilience

System has significant issues against criteria

Most parts of the system are designed to be flexible -agencies can revise their instruments and redirect their focus in response to the changing environment. However, a degree of inflexibility is inevitable, especially with matters prescribed in primary legislation (eg, definitions of electricity market activities and participants). A Council of Energy Regulators has been established to oversee the electricity and gas markets regulatory system, as a means to ensure their respective activities and processes remain aligned and coherent in the face of market developments.

The impact of emerging technologies on the electricity market subsystem is a current area of focus. We are working closely with the Electricity Authority and Commerce Commission to ensure the overall regulatory system is fit for purpose in the face of disruptive trends (eg, the falling cost and increasing performance of batteries and household-scale generation).

Fairness and accountability

System performing well against criteria

Each regulatory agency makes extensive use of stakeholder advisory groups to explore problems and develop solutions. This promotes transparency and participation in system improvement and design.

Each agency publishes guidance on its approach to compliance monitoring and enforcement. Every electricity and gas consumer has access to a free complaints service to help resolve deadlocked disputes with suppliers. According to the Government Centre for Dispute Resolution, “The Electricity and Gas Complaints Commissioner Scheme (EGCC) has used innovative service delivery and strong committed leadership to build an organisation that delivers examples and lessons in dispute resolution excellence”.

It is difficult for some consumers to participate effectively in regulatory processes despite the agencies’ best efforts to facilitate (eg, by publishing material in plain English, and ensuring advisory groups have effective consumer representatives). We will continue to monitor this issue and explore measures to improve consumer participation and engagement.

Planned regulatory changes

The timeframes for improvements noted in this section are indicative and may change. We will review this information at least quarterly and update timeframes as required.

Electricity Price Review (EPR)

An independent Expert Advisory Panel is leading the electricity price review, which is investigating the performance of the industry and whether regulation of the sector will remain fit for purpose in the face of emerging technologies and progress towards a lower emissions economy. The panel is to report to the Government in April 2019.

Amendments to the Gas Act

MBIE is leading a targeted review of the Gas Act 1992 in 2019. Please see the table of planned regulatory changes below for more details about expected timelines and consultation opportunities.

Other agencies’ work programmes

The Electricity Authority, Gas Industry Company and Commerce Commission each have ongoing programmes for developing the market rules they are responsible for. The work programmes are available on their websites:

Table of planned regulatory changes

Matter name Policy intent Planned consultation Status

Review of Gas Act 1992

Matter type: Bill

This review of the Act is important in the context of the recent gas production outages, which has had impacts on the downstream gas market, including the electricity generators. The review will consider the challenges that emerging technologies and alternative fuels (such as hydrogen) present to the Act and how fit for purpose the Act is for enabling the development and deployment of alternative, low-emissions fuel sources.

Two key changes to the Act are being proposed:

  • The addition of new gas governance powers under the Act to facilitate enhanced information disclosure in the gas industry and significant improvements to the information disclosure regime for the gas market.
  • Strengthening of the penalties able to be imposed under the Act. This is particularly important for ensuring sufficient incentive for consumers to follow directions in a gas critical contingency event and ensure that the penalties are fit-for-purpose.

A public discussion document is expected to be released in the first half of 2019.

MBIE will also engage with stakeholders on the challenges that emerging technologies and alternative fuels (such as hydrogen) present to the Act.

MBIE is in the final stages of drafting a discussion document for public consultation.

A bill is expected to be introduced into the House around the middle of 2019 to address targeted issues.

Planned service and operational changes

No significant changes are planned by MBIE.

Last updated: 28 March 2019