Electricity Industry Participation Code 2010

• This Part provides for—
• (aa) a reasonable and prudent system operator standard; and
• (a) high level, output focussed performance obligations of the system operator in relation to the real time co-ordination and delivery of common quality and dispatch; and
• (b) the functions of the system operator in relation to demand and supply forecasting, security of supply, and supply emergencies; and
• (c) review of the system operator's performance under the Act, this Code, and the relevant market operation service provider agreement; and
• (d) requirements for the amendment or replacement of system operation documents.

• (1) The system operator must carry out its obligations under this Code with skill, diligence, prudence, foresight, good economic management, and in accordance with recognised international good practice, taking into account—
  • (a) the circumstances in New Zealand; and
  • (b) the fact that real-time co-ordination of the power system involves complex judgements and inter-related events.
• (2) The system operator does not breach a principal performance obligation or clause 8.5 of this Code if the system operator complies with subclause (1).

• The obligations in clauses 7.2A to 7.2D are principal performance obligations.

• (1) The system operator must dispatch assets made available in a manner that avoids cascade failure of assets resulting in a loss of electricity to consumers arising from―
  • (a) a frequency or voltage excursion; or
  • (b) a supply and demand imbalance.
• (2) Except as provided in this clause and clause 7.2B, the system operator must maintain frequency in the normal band.
• (3) The system operator must ensure that the scheduling, pricing, and dispatch tool has the information necessary to schedule a minimum quantity of instantaneous reserve.
• (4) Subject to the availability of offers or reserve offers, the system operator must schedule sufficient instantaneous reserve to meet the system operator's obligations in subclauses (5) to (7).
• (5) During a contingent event, the system operator must ensure that, for the island in which the contingent event takes place—
  • (a) frequency remains at or above 48 Hertz; and
  • (b) frequency returns to or above 49.25 Hertz within 60 seconds after the contingent event.
• (6) During an extended contingent event in the North Island, the system operator must ensure that, for that island—
  • (a) frequency remains at or above 47 Hertz; and
  • (b) frequency does not drop to or below 47.1 Hertz for longer than 5 seconds; and
  • (c) frequency does not drop to or below 47.3 Hertz for longer than 20 seconds; and
  • (d) frequency returns to or above 49.25 Hertz within 60 seconds after the extended contingent event.
• (7) During an extended contingent event in the South Island, the system operator must ensure that, for that island—
  • (a) frequency remains at or above 45 Hertz; and
  • (b) frequency returns to or above 49.25 Hertz within 60 seconds after the extended contingent event.

• If a frequency fluctuation occurs, the system operator must ensure that frequency is restored to the normal band as soon as reasonably practicable having regard to all circumstances surrounding the frequency fluctuation.

• (1) A participant may request that the system operator investigate and resolve a security of supply or reliability problem arising from non-compliance with a standard in clause 4.7, 4.8, or 4.9 of the Connection Code, at any point of connection to the grid.
• (2) If the system operator receives a reasonable request under subclause (1), the system operator must, given the assets made available to it at the relevant time—
  • (a) identify whether there is a security of supply or reliability problem arising from non-compliance with a standard in clause 4.7, 4.8, or 4.9 of the Connection Code, at any point of connection to the grid; and
  • (b) if there is such a problem—
    • (i) identify the cause of the problem; and
    • (ii) resolve the problem to the extent reasonable and practical.

• (1) By the 10^th business day of each month (except by the 20^th business day in the month of January), the system operator must report to the Authority the number of frequency fluctuations in each of the following frequency bands, in each island in the previous month:

• (2) By the 10^th business day of each month (except by the 20^th business day in the month of January), the system operator must report to the Authority the number of frequency fluctuations in each of the following frequency bands, in the South Island in the previous month:

• (1) The system operator must—
  • (a) prepare and publish a security of supply forecasting and information policy that includes a requirement that the system operator—
    • (i) prepare and publish at least annually a security of supply assessment that contains detailed supply and demand forecasts for at least 5 years, which assists interested parties to assess whether the energy security of supply standard and the capacity security of supply standard set out in subclause (2) are likely to be met; and
    • (ii) consult with persons that the system operator thinks are representative of the interests of persons likely to be substantially affected by a security of supply assessment prepared under subparagraph (i) before publishing such an assessment; and
    • (iii) prepare and publish information that assists interested parties to monitor how hydro and thermal generating capacity, transmission assets, primary fuel, and ancillary services are being utilised to manage risks of shortage, including extended dry periods; and
    • (iv) publish, in relation to the information published under subparagraphs (i) and (iii), sufficient details of the modelling data, assumptions, and methodologies that the system operator has used to prepare that information as to allow interested parties to recreate that information (but without publishing information that is confidential to any participant); and
  • (b) implement and comply with the security of supply forecasting and information policy prepared and published in accordance with paragraph (a).
• (2) For the purposes of subclause (1)(a)(i)—
  • (a) the energy security of supply standard is a winter energy margin of 14-16% for New Zealand and a winter energy margin of 25.5-30% for the South Island; and
  • (b) the capacity security of supply standard is a winter capacity margin of 630-780 MW for the North Island.
• (2A) The Authority may publish a security standards assumptions document.
• (2B) Subject to subclauses (2C) and (2D), if the Authority has published a security standards assumptions document under subclause (2A), the system operator must use the assumptions set out in that document in preparing a security of supply assessment under the security of supply forecasting and information policy.
• (2C) The system operator may use different assumptions from those in a security standards assumptions document to prepare a security of supply assessment if—
  • (a) the system operator considers that there are good reasons to use different assumptions; and
  • (b) the system operator includes in the security of supply assessment—
    • (i) a detailed explanation of the assumptions used to prepare the security of supply assessment; and
    • (ii) a statement of reasons for using those assumptions instead of the assumptions published by the Authority; and
    • (iii) a description of how the security of supply assessment prepared using those assumptions differs from a security of supply assessment prepared using the assumptions set out in the security standards assumptions document.
• (2D) Despite subclause (2C), the system operator is not required to include the information referred to in subclause (2C)(b) in a security of supply assessment if the system operator considers that it would have good reason to refuse to supply the information under clause 2.6.
• (3) The system operator must —
  • (a) prepare and publish an emergency management policy that sets out the steps that the system operator must take, and must encourage participants to take, at various stages during an extended emergency such as an extended dry sequence or an extended period of capacity inadequacy; and
  • (b) include in the emergency management policy the steps that, at various stages in anticipation of and during a gas transmission failure or gas supply failure to generators, the system operator must—
    • (i) take as the system operator; and
    • (ii) encourage participants to take, including, if appropriate, steps for relevant participants to take in conjunction with gas industry entities; and
    • (iii) encourage relevant gas industry entities to take; and
  • (c) implement and comply with the emergency management policy.
• (4) The emergency management policy is not required to include information that is already set out in—
  • (a) the system operator rolling outage plan prepared under subpart 1 of Part 9; or
  • (b) the policy statement; or
  • (c) Technical Code B of Schedule 8.3.
• (5) The system operator may depart from the policies set out in an emergency management policy if an EMP departure situation arises and such departure is required to enable the system operator to comply with clause 7.1A(1).
• (6) If the system operator makes a departure under subclause (5), the system operator must provide a report to the Authority setting out the circumstances of the EMP departure situation and the actions taken to deal with it. The Authority must publish the report within a reasonable time of its receipt.

• (1) The security of supply forecasting and information policy and the emergency management policy are incorporated by reference in this Code.
• (2) Clauses 7.13 to 7.22 apply to any amendment or replacement of the security of supply forecasting and information policy or emergency management policy.

• (1) At least annually, the system operator and the Authority must agree a development programme that coordinates and prioritises—
  • (a) those items in the Authority's industry development work plan on which the Authority intends to liaise with the system operator; and
  • (b) the system operator's capital expenditure plan provided to the Authority under the system operator market operation service provider agreement.
• (2) The Authority must publish the programme agreed under subclause (1).

• (1) The Authority must review the performance of the system operator after the system operator submits its self-review under clause 7.11.
• (1A) The Authority may review the performance of the system operator at any other time provided it has used reasonable endeavours to provide the system operator with reasonable notice of the review.
• (1B) If the Authority requests the system operator to provide information or input into a review under subclause (1A), the Authority must provide the system operator with a reasonable timeframe in which to respond to the request.
• (2) Each review under this clause must concentrate, to the extent relevant, on the system operator’s compliance with—
  • (a) its obligations under this Code and the Act; and
  • (b) the operation of this Code and the Act; and
  • (c) any performance standards agreed between the system operator and the Authority; and
  • (d) the provisions of the system operator’s market operation service provider agreement.
• (3) The Authority must publish a report on each review under this clause no later than 10 business days after the Authority completes its review.

• The Authority must take into account the following matters when conducting a review under clause 7.8:
  • (a) the terms of the system operator’s market operation service provider agreement:
  • (b) reports from the system operator to the Authority, including the system operator’s self-review under clause 7.11:
  • (c) the performance of the system operator over time in relation to this Part and Part 8:
  • (d) the extent to which the acts or omissions of other persons have impacted on the performance of the system operator and the nature of the task being monitored:
  • (e) reports or complaints from any person, and any responses by the system operator to such reports or complaints:
  • (f) the fact that the real time co-ordination of the power system involves a number of complex judgments and inter-related incidents:
  • (g) any disparity of information between the Authority and the system operator:
  • (h) any other matter the Authority considers relevant to assess the system operator’s performance.

• (1) Transpower's role as system operator under this Code and the Act is distinct and separate from any other role or capacity that Transpower may have under this Code and the Act, including as a grid owner or transmission provider.
• (2) For this purpose, when assessing an aspect of the performance, or non-performance, of the system operator,—
  • (a) the assessment must be made on the basis that the system operator had no other role or capacity; and
  • (b) the system operator must be treated as if it did not have any knowledge or information that may be received or held by Transpower unless Transpower receives or holds that information or knowledge in its capacity as system operator.
• (3) Subclause (2) applies, with necessary modifications, to an assessment of an aspect of the performance, or non-performance, of Transpower in any other role or capacity under this Code or the Act.
• (4) Transpower must report, in each self-review report provided under this Code, on the extent to which its role as system operator under this Code and the Act has, despite subclauses (1) to (3), been materially affected by—
  • (a) any other role or capacity that Transpower has under this Code or the Act; or
  • (b) an agreement.

• (1) No later than 31 August in each year, the system operator must submit to the Authority a review and assessment of its performance in the previous 12 month period ending 30 June.
• (2) The self-review must contain such information as the Authority may reasonably require from time to time to enable the Authority to review the system operator’s performance during the period in relation to the following:
  • (a) the policy statement:
  • (b) the security of supply forecasting and information policy:
  • (c) the emergency management policy:
  • (d) the joint development programme prepared under clause 7.7(1):
  • (e) the work programmes agreed with the Authority under the system operator’s market operation service provider agreement:
  • (f) the system operator’s engagement with participants:
  • (g) delivery of the system operator’s capital and business plans:
  • (h) the financial and operational performance of the system operator.
• (3) [Revoked]
• (4) [Revoked]

• (1) The Authority must publish all self-review reports that are received from the system operator and that are required to be provided by the system operator to the Authority under this Code.
• (2) The Authority must publish each report within 5 business days after receiving the report.

• (1) A proposal to amend a system operation document is made by the system operator to the Authority.
• (2) The process for the system operator to develop a proposal may be initiated by—
  • (a) the Authority directing the system operator to consider a proposal to amend a system operation document; or
  • (b) the system operator agreeing under clause 7.14 to progress an amendment to a system operation document; or
  • (c) the system operator deciding to progress an amendment, either—
    • (i) at the conclusion of a review carried out under clause 7.15; or
    • (ii) at any other time.
• (3) Before providing a proposal to the Authority to amend a system operation document, the system operator must consult on the proposal where required by clause 7.20, after obtaining consent as required by clause 7.16.
• (4) For the purposes of clauses 7.13 to 7.22, a proposal to amend a system operation document includes a proposal to replace a system operation document.

• (1) If a participant requests an amendment to a system operation document to the system operator, the system operator must decide to—
  • (a) consider the amendment as part of the next review under clause 7.15; or
  • (b) consider the amendment outside of a review; or
  • (c) decline to consider the amendment.
• (2) The system operator must advise the Authority and the participant that requested the amendment of its decision, including its reasons, within 1 month of receiving the request.

• (1) The system operator must review the policy statement and the procurement plan at least once every 2 years to identify whether the document should be amended.
• (2) For the purposes of subclause (1), any 2 year period commences on either—
  • (a) the date the last review of the document was completed if that review did not result in an amendment being made; or
  • (b) if a review results in an amendment being made, the date the amendment takes legal effect.
• (3) At the conclusion of a review the system operator must either—
  • (a) propose an amendment to the Authority, following consultation where required by clause 7.20, after obtaining consent as required by clause 7.16; or
  • (b) advise the Authority that the system operator does not consider that an amendment is required and provide the Authority with a written report describing the process carried out for the review, the system operator’s decision, and the reasons for the decision.

• (1) The system operator must obtain the Authority’s consent before consulting on a proposal to amend a system operation document.
• (2) The purpose for the Authority consenting to consultation is to enable the Authority to identify to the system operator any issues with—
  • (a) the proposal that may cause the Authority to not issue a notice to adopt the amendment under section 131B(2) of the Act or to not progress the amendment as a Code amendment under section 38 of the Act, as the case may be; and
  • (b) the system operator’s proposed consultation process and the information to be provided with the proposal for consultation under clause 7.20(2)(a).
• (3) When requesting the Authority’s consent, the system operator must provide the following information to the Authority:
  • (a) the consultation information in clause 7.20(2)(a):
  • (b) the proposed consultation period in clause 7.20(2)(b):
  • (c) the system operator’s proposed consultation process:
  • (d) a list of the persons the system operator proposes to consult with.
• (4) The Authority must within a reasonable period time after receiving the system operator’s request for consent either—
  • (a) consent to the consultation and notify the system operator accordingly; or
  • (b) raise any issues it has identified under subclause (2) with the system operator.

• (1) In addition to its powers under clause 7.16, the Authority may direct the system operator to make changes to any of the matters listed in clause 7.16(3), other than the proposed amendment itself.
• (2) The Authority may not give a direction under subclause (1) if the effect of the direction is that the proposal, if finally made, could not be considered to have been made by the system operator for the purposes of section 131B(2) of the Act.

• (1) If the Authority identifies any issues or concerns under clause 7.16(2)(a), unless the Authority has given a direction under clause 7.17(1), the system operator must consider those issues and either—
  • (a) amend the proposal, proposed consultation process or the consultation information to be provided with the proposal and re-submit the information required under clause 7.16(3) to the Authority for approval; or
  • (b) decide not to continue with the proposal; or
  • (c) continue with the proposal without making any amendment to it, the proposed consultation process or the information to be provided with the proposal.
• (2) If the Authority directs the system operator under clause 7.17(1), the system operator must make the change and re-submit the information required under clause 7.16(3) to the Authority for approval.
• (3) If the system operator re-submits the information required under clause 7.16(3) to the Authority, the Authority must re-consider the information and decide either to:
  • (a) consent to the consultation; or
  • (b) not consent to the consultation.
• (4) If the Authority does not to consent to a proposal for consultation under subclause (3), the system operator must decide either—
  • (a) to not continue with the proposal; or
  • (b) to continue with the proposal.
• (5) The system operator and the Authority must give each other notice of their decisions and the reasons for the decision under the above subclauses.

• (1) The Authority’s consent to consultation under clause 7.16(4)(a) or 7.18(3)(a) or to direct the system operator under clause 7.17(1) does not affect the Authority’s decision regarding approval of a system operation document under clause 7.21.
• (2) If the system operator continues with a proposal under clauses 7.18(1)(c) or 7.18(4)(b), the system operator:
  • (a) does so with the risk that the Authority may decide not to issue a notice to adopt the amendment under section 131B(2) of the Act or to not progress the amendment as a Code amendment under section 38 of the Act; and
  • (b) must advise the persons it consults with under clause 7.20 that the Authority has not consented to the consultation and that the risk described in paragraph (a) arises.
• (3) Subclause (2)(a) does not prevent the Authority from deciding to not issue a notice to adopt an amendment under section 131B(2) of the Act or to not progress the amendment as a Code amendment under section 38 of the Act.

• (1) The system operator must consult on any proposed amendment of a system operation document with affected participants or persons that represent the interests of those persons likely to be affected by the proposed amendment.
• (2) The system operator must, at least, carry out the following steps as part of consultation on a proposed amendment:
  • (a) make the following information available to the persons it is consulting with:
    • (i) a draft of the proposed amendment:
    • (ii) a statement of the objectives of the proposed amendment:
    • (iii) an evaluation of the costs and benefits of the proposed amendment:
    • (iv) an evaluation of alternative means of achieving the objectives of the proposed amendment (if any):
  • (b) provide a reasonable period of time to the persons it is consulting with to consider the information provided under paragraph (a) and to make submissions:
  • (c) consider any submissions.
• (3) In evaluating the costs and benefits of a proposed amendment under subclause (2)(a)(iii), the system operator must undertake a quantitative assessment, if reasonably possible.
• (4) The system operator must provide a copy of each submission received under subclause (2) to the Authority.
• (5) Despite subclause (1), consultation is not required if the system operator satisfies the Authority, on reasonable grounds, that—
  • (a) the nature of the amendment is technical and non-controversial; or
  • (b) there is widespread support for the amendment among the persons likely to be affected by it; or
  • (c) there has been adequate prior consultation so that all relevant views have been considered; or
  • (d) it is necessary or desirable in the public interest that the proposed amendment be made urgently.

• (1) Following consultation, or if clause 7.20(5) applies, the system operator must provide the Authority with a report that sets out the following:
  • (a) the information required by clause 7.20(2)(a), regardless of whether or not consultation was carried out, but incorporating any changes made following consultation:
  • (b) a summary of any submissions received and the system operator’s response to each:
  • (c) a list of any changes made to the proposed amendments to the system operation document after consultation and the reasons for the changes:
  • (d) if clause 7.20(5) applies, the reasons why the system operator considered that consultation was not required:
  • (e) a final draft of the proposed amendments to the system operation document (either as amendments to the system operation document or a replacement system operation document).
• (2) After receipt of the report, the Authority may—
  • (a) approve the proposed amendments to the system operation document; or
  • (b) require the system operator to conduct further consultation before re-submitting the proposed amendments to the system operation document to the Authority for approval; or
  • (c) decline to approve the proposed amendments to the system operation document.
• (3) The approval by the Authority of proposed amendments to a system operation document—
  • (a) does not remove the requirement for the Authority to comply with either section 38 or section 131B of the Act in order to give legal effect to the amendments as part of the Code; and
  • (b) does not affect, pre-determine or otherwise override any decision by the Authority under section 38 or section 131B of the Act.
• (4) To avoid doubt, an approved system operation document is not invalid only because the Authority and the system operator did all or any of the things referred to in clauses 7.16 to 7.20 before those clauses came into force.

From time to time the Authority may prescribe reasonable timeframes that the system operator must comply with in completing any steps in clauses 7.16 to 7.21.