Authority completes investigations on alleged breaches of trading conduct rules

The Authority has completed its investigation into Meridian and Contact’s alleged breaches of the high standard of trading conduct provisions of the Electricity Industry Participation Code (Code) from November 2019 to January 2020.

The investigation concluded there was no breach of the existing rules and on that basis the Board has decided not to lay a complaint with the Rulings Panel.

James Stevenson-Wallace, Chief Executive of the Authority says the investigator advised that based on the information available Meridian and Contact did not breach the high standard of trading conduct on the basis that the conduct during the period was sheltered by the safe harbour provisions.

The investigator concluded Meridian and Contact did not breach the high standard of trading conduct because available capacity was offered, offers were made and revised in a timely manner, and one of the set of conditions of the safe harbour rule was met. Specifically, both generators demonstrated consistent offers in periods where they were pivotal with offers in periods where they were not.

From time to time, the system relies heavily on one or a small number of suppliers to meet demand. The trading conduct rules were designed to prevent suppliers taking advantage of such situations.

The trading conduct rules have been considered in several events since they were introduced in 2014, and their interpretation has evolved. The Authority considers a lack of clarity in how the rules are structured presents interpretation issues and challenges for how the standards are applied in practice. As a result, these rules have been under review and the Authority has consulted on proposed changes.

The Authority considers the proposed new rules will help address the acknowledged problems with the current ‘safe harbour’ provisions, including that the provisions are difficult to apply in practice and may shelter and facilitate behaviour inconsistent with a high standard of trading conduct.

The review has been comprehensive and well informed by stakeholders and legal experts. Most stakeholders agree changes are necessary and the Authority is committed to finishing the process and updating the rules as soon as possible. The Authority expects to make a final decision on the proposed new rules in June 2021.

The Authority is complementing this work with an expansion of the Authority’s monitoring capability to increase focus in this area and is working with MBIE to reform the structure of penalties available in the electricity sector. 

“We are committed to reforming the regulatory settings to ensure all participants are held to a high standard of conduct to protect the long-term benefits for consumers” says Mr Stevenson-Wallace.

Notices of the Authority’s decisions are published here.