The Government has released the terms of reference for its review of electricity market performance (Market Review) which will assess current market structure, design and rules and advise on options to improve performance against key policy objectives. 

The Market Review will consider all matters that could affect electricity market performance, with particular attention to seven broad questions (set out below). The review will also consider other recent reports and investigations, including the Market Development Advisory Group’s 2023 report on pricing in a renewables-based electricity system and current work of the Energy Competition Task Force. International electricity market experience will also be considered as part of the Market Review. 

In terms of output, the Market Review will identify what it believes are the key performance issues with New Zealand’s electricity market and recommend the ‘top ten’ priority actions, ranked by urgency and impact. 

Issues for the Market Review

The Market Review will evaluate electricity market performance against the Government’s policy objectives, set out in the Government Policy Statement on Electricity released in October 2024 (see our summary here). These objectives are mainly focussed on ensuring the reliability and security of supply, market efficiency and competitiveness, and affordability for consumers. 

Next steps

The review is not expected to begin until 2025. Once the Government has appointed a reviewer, they will have two months to deliver a draft report and four months to deliver the final report. The reviewer must also present and discuss the draft report with two independent peer reviewers, whose reviews will be available to the Minister before the report is finalised. 

In contrast to the 2018/19 Electricity Price Review for which there were two rounds of public consultation, the reviewer is not expected to consult with the public or stakeholders on its findings or recommendations, but may test preliminary views with ‘target stakeholders’. 

Observations

Recent wholesale electricity price volatility has proven challenging for generators, retailers, and consumers. Some high profile large consumers have closed or scaled back their operations, citing high energy costs as a major contributing factor. The Government announced the Market Review in August 2024 when Energy Minister Simeon Brown said New Zealand faced the “highest wholesale electricity prices of any of the countries we normally compare ourselves to”.

The Market Review should assist with building upon previous work to improve performance of the electricity market, which is urgently needed as New Zealand’s energy transition enters a new and more accelerated phase on both the supply and demand sides. 

The most impactful outcomes would be achieved by ensuring that the Market Review is carried out with regards to, and potentially in collaboration with, the Energy Competition Task Force’s work programme, given the significant overlap. The timeline for the Market Review would see its final report delivered around mid-2025, which is the same time as the Task Force has indicated there will be changes to the Electricity Industry Participation Code to implement some of its workstreams.

Get in touch

If you have any questions on the electricity market review, or what it means for your business, please do get in touch with our experts.

Special thanks to Michael Carston and Phoebe Wood for their assistance in writing this article.