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EA says retailers have undermined benefits of rule changes

EA says retailers have undermined benefits of rule changes

First published in Energy and Environment on October 10, 2019.

Electricity retailers have acted in ways to undermine the intended benefits of the ‘save protection scheme’ and the ‘retail data project’ says the Electricity Authority.

The EA said in its Market Performance Quarterly Review that these actions have, in-part, contributed to reviewing the need for a central customer database and must be kept front-of-mind in the saves and the win-backs project. The Review was written before the Government decided it wants the EA to prohibit saves and win-backs.

In 2015 the Authority introduced a switch save protection scheme prohibited a losing retailer from initiating contact to offer inducements to any of its customers that are acquired by another retailer (if the gaining retailer had chosen save-protection) until the switch was complete. A review of the moves found the number of saves fell and the number of win-backs increased as a result of the scheme.

The retail data project was meant to make it easier for consumers and third parties to get access to their consumption data. A review found it had mainly worked but there had been a number of barriers.

The Government has also told the EA to make access to data even easier.

The EA’s quarterly report also noted spot prices in the first quarter of 2019 were on average higher than in previous years. Even when South Island storage increased in April 2019 the spot price decreased rapidly in response, prices had not fallen to the average prices seen historically.

“There are some possible reasons why the price has remained high: lake levels were low in the North Island, gas spot prices are still high and there is increased uncertainty, especially around gas supply. We plan to further investigate the sustained period of high prices seen so far in 2019 to fully identify the contributing factors and to ensure that no undue use of market power is exacerbating the situation,” the EA said.

It also noted there will be concurrent outages of the HVDC and the Pohokura gas production facility scheduled in the first quarter of 2020 which are already causing very high forward prices for that quarter.

“The system operator is working with the industry to minimise the impact of the 2020 outages. Transpower has moved the bipole outages to the weekend to lower the impact. Genesis Energy has rescheduled a Rankine outage until after the HVDC and Pohokura outages are completed. The conservative scenarios used by the system operator to model security include one with no wind generation, TCC (Contact Energy’s CCGT in Taranaki) not running and Huntly only running at 80% capacity. The September NZ generation balance has reported no generation shortfall for the outage period, even in this worst case scenario.”

The EA also highlighted:

Demand up slightly. Demand was up slightly in the first seven months of 2019 compared with the same period over the last 11 years. However, the overall picture is still one of relatively flat demand—both total and peak—since 2008. The additional potline at Tiwai contributed to the slight increase in consumption in 2019.

Small retailers continued to gain connections. Electric Kiwi, Vocus, Energyclub and Ecotricity continue to grow strongly. However, Flick’s market share continues to suffer from the high wholesale prices. Mercury had the largest loss amongst all retailers, losing 14,921 connections. Electric Kiwi gained 10,340 connections, the largest gain among all parent retailers. Electric Kiwi launched in December 2014 and is now the eighth largest retailer based on market shares. Meridian was the second highest retailer gaining connections, followed by Vocus.

It said peak demand so far in 2019 is lower than the peak demand experienced in the past 11 years except 2014. Peak demand drives investment in infrastructure, particularly transmission, and peaking generation.

It also said the number of projects underway suggests that generators expect demand to increase. A number of generation plants are under construction or seeking consent, including:

• Nova’s 100MW thermal plant at Junction road in Taranaki

• Tilt Renewable’s 130MW Waipipi wind farm (formerly known as Waverly) in Taranaki

• Mercury’s 119MW Turitea wind farm in the Manawatu

• Contact’s drilling campaign at the Tauhara steam field near Taupo, to support a final investment decision on new generation at the site

• Meridian seeking potential contractors for the civil works at its consented 270MW wind farm northwest of Napier.
First published in Energy and Environment on October 10, 2019.

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