Commission finds electricity rules do not lessen competition
Published13 Sep 1996
The Commerce Commission has concluded today that the proposed rules for the New Zealand Electricity Market (NZEM) will not lessen competition.
The Commission has been considering applications from the NZEM administrator, the Electricity Market Company (EMCO). The applications were for authorisation of the pricing mechanisms, prudential provisions and the adoption of metering standards for NZEM.
It is intended that from October 1, 1996 NZEM will offer facilities for trading electricity, and for trading electricity contracts for the following day.
Commission Chairman Dr Alan Bollard said that the Commission considered that the two facilities will promote wholesale electricity trading. The matters which are the subject of the applications are important elements in the development of the wholesale electricity market and, in the Commission's view, will not result in a lessening of competition.
The Commission has spent three months investigating the applications. It published a draft determination giving its preliminary views, received and studied 22 detailed submissions on the draft determination and held a conference of interested parties at which these interested parties were able to provide further information and answer questions asked by the Commission.
Among the concerns raised about the pricing mechanisms was that the price at which electricity will be traded through the NZEM facility will not be known with certainty until after the electricity has been used. It was argued that this will mean that the ability of purchasers to engage in demand side management - that is, to adjust consumption in response to price changes - will be reduced.
The Commission noted, however, that these purchasers will have access to price forecasts and will also be able to hedge against unforeseen price changes. It has concluded that the rules will have only a small impact which will be more than offset by an enhancement of competition among generators.
The Commission accepted that the prudential provisions in the rules impose a cost on some purchasers (and may benefit generators) but this will not lessen competition in the relevant markets.
In addition, the Commission concluded that the adoption of common metering standards by the rules appeared to be logical and this will have no detrimental competitive impact.
Dr Bollard said that as the rules for which authorisation has been sought will not lessen competition, authorisation is neither required nor within the jurisdiction of the Commission.
He added that these rules are only a small portion of all the rules for NZEM. The Commission has made no judgement on the competitive implications of the rules which are not part of the applications.
