Managing Retailer Default Situations
Assuring Customer Supply
1 Mar 2011
As part of its brief to promote competition, reliable supply and efficient operation of the electricity industry, the Authority announced in December its intention to review inherited policies and projects from the Electricity Commission.
The Authority has therefore reviewed work, commenced by industry participants in 2000 and pursued more recently by the Electricity Commission, to avoid customer stranding and ensure continuity of supply in the event of retailer default. These types of rules are common in other electricity markets.
Pending completion of permanent arrangements, the Authority has prepared interim measures that can be invoked in the meantime should a requirement arise. These measures involve internal Authority guidelines for managing potential stranding situations and draft Code amendments that can be introduced under urgency if necessary.
The requirement for orderly supply transition arrangements has been expressed in each electricity industry Government Policy Statement since 2000. Work was initially undertaken as an industry self-governance activity under the New Zealand Electricity Market and the Metering and Reconciliation Information Agreement. Further work, including industry consultation, was then done from 2004 by the Electricity Commission before being impacted by other higher priority projects and the 2009 Ministerial Review.
This extended development history reflects both the:
- complexity of balancing customer needs and retailer commercial interests in the design of any solution
- relatively low probability of occurrence. The instances of retailers exiting the electricity market since 1999 have all involved orderly customer transfer between retailers.