The Authority has today published a market performance review into high South Island reserve prices in May 2012. The review finds that by purchasing the right to offer interruptible load associated with the Tiwai Point aluminium smelter, Meridian Energy increased its ability to affect wholesale market reserve and energy prices.

By controlling the offer price of a greater percentage of the available reserves in the South Island, Meridian Energy was able to restrict the ability of North Island generators to compete in the South Island wholesale energy market. As a result wholesale energy prices were higher in the South Island and lower in the North Island than they otherwise would have been.

The report also shows that Meridian Energy's actions did not impact on South Island hydro reserves, and so did not affect security of supply.

Meridian Energy ceased offering high prices for reserves shortly after the Authority began this review. The right to offer interruptible load at the smelter has now passed on to another party, and is being offered at low prices. The review notes that it will be very difficult for any party to influence energy market prices via conduct in the reserves market after Pole 3 of the inter-island HVDC link is commissioned in February 2013.

The report concludes that general restrictions on offer-rights trading may be desirable to promote competition. The specific conduct of Meridian Energy and the smelter operator may in this instance fall within the scope of the Commerce Commission. The Authority has liaised with the Commerce Commission about its findings and the Commerce Commission is now investigating the Meridian agreement under the Commerce Act. The Authority will await a decision by the Commerce Commission before deciding whether to further consider a change to the Electricity Industry Participation Code 2010 (Code).

The review is available at:

The Authority's Retail Advisory Group has published a second discussion paper on arrangements for managing retailer default situations. It seeks feedback on the proposal in general, and on the specific questions asked in the discussion paper, which it will use to provide advice and recommendations to the Authority Board. The Retail Advisory Group provides independent advice to the Authority on the development of the Code and market facilitation measures, focusing on retailer, distributor and consumer relationships. It has an independent chairperson and comprises members from industry and consumer representatives.

Submissions on the discussion paper may be emailed to rag@ea.govt.nz. Submissions close at 5pm on Tuesday, 25 September 2012.

The discussion paper is available at:

The Authority is about to undertake surveys of various businesses across New Zealand, as well as households in Canterbury, Taranaki and Wellington, as part of its investigation into the value of lost load (VoLL). The surveys follow on from the work on this topic undertaken by the Electricity Commission in mid-2010, which sought to gain an understanding of how New Zealand electricity consumers were affected by a loss of power supply.

Further information relating to the work on the value of lost load is available at:

The half-yearly report from the Wholesale Advisory Group chair James Moulder, for January to June 2012, is now available at:

Papers from the Wholesale Advisory Group meeting of 9 August 2012, have been published at:

Minutes for the Retail Advisory Group meeting of 6 July are available at:

The Authority's latest Compliance update is available at:

Click on banner to access: