The majority shareholder of Auckland's lines company says the electricity market is failing consumers and is calling for more competition and regulatory reform to address market shortcomings.
By Nona Pelletier of RNZ
Entrust, which owns just over 75% of Vector on behalf of 372,000 customers, said the government's proposed Winter Energy Reliability Obligation policy was an indication New Zealand's electricity market was failing consumers.
The obligation put forward by the Ministry of Business, Innovation and Employment was meant to address dry year risk by ensuring major generators and users secured sufficient supply to meet peak winter demands.
"The whole reliability obligation that the government's putting in is actually the indication that the market is failing consumers, and something needs to happen," Entrust chair Denise Lee said.
"The current system is failing to deliver reliability or affordability. Under-investment in new and backup generation has left the country vulnerable to supply shortages and sharp price spikes during dry years."
Lee said the Electricity Authority had been too cautious in addressing structural failings in the market, which had resulted in the need for government intervention.
She said new obligations should be applied to the four large incumbent gentailers -- Contact, Genesis, Mercury and Meridian -- as well as Tiwai Smelter.
"These parties have the scale and market power to meaningfully address dry-year risk."
She said Entrust considered dry-year risk to be part of a broader competition problem in a market dominated by four large, incumbent gentailers.
"If we do have a genuinely competitive market, why are we seeing persistent under-investment and lack of building that generation capacity much later than we all should. That's the very definition of keeping a market perennially tight.
"There needs to be a stronger focus on reducing barriers for smaller and independent generators."
Lee said the electricity market appeared to lurch from one energy crisis to the next, which was an unacceptable situation for a country with New Zealand's natural resources.
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"The result has been higher wholesale prices and annual increases in gentailer profits, which is not a good outcome for households, businesses, or the wider economy."
She said New Zealand had the natural resources to deliver reliable, affordable electricity and support energy-intensive industries on the world stage.
"What's needed now is a more mature regulatory framework and a more competitive market to ensure it happens."
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