Consultation

We have published a consultation paper on our review of two aspects of the customer compensation scheme (CCS):

1. addressing possible inefficiencies in how the CCS handles customer switching during conservation campaigns
2. whether the minimum weekly amount (MWA) of the default compensation scheme should be calculated annually.

These two aspects were identified as possible refinements to the CCS in our 2016/17 review.

We propose amending the Code to require electricity retailers to pay qualifying customers only for the time they supply those customers during a public conservation period. Currently, retailers must compensate all qualifying customers they supply at end of the last day of the conservation period. This obligation applies even if those customers switched to the retailer during the conservation period. We consider the proposal would promote the competition and efficiency limbs of the Authority’s statutory objective by removing the incentive for retailers not to gain customers during conservation periods to avoid paying compensation for the days when they did not supply those customers.

We propose the current CCS arrangements in the Code provide appropriate flexibility for reviewing the calculation of the MWA of the default compensation scheme. We do not propose any amendments are required.

Note: Due to the 14 November earthquake, the Authority is aware that some interested parties were not able to return to their offices for several days. Therefore, the Authority has extended the deadline for accepting submissions on this paper and the Review of the stress test regime until 5 pm on Tuesday, 6 December 2016.

We have published consultation papers on our reviews of two security of supply mechanisms: the customer compensation scheme (CCS) and stress test regime. The Authority decided to review these mechanisms to ensure they continue to promote the reliability and efficiency limbs of the Authority’s statutory objective in the face of changing market conditions.

We have concluded that the CCS remains fit for purpose and do not propose any changes to its design. We welcome feedback regarding the issues examined in this paper.

We have also released a companion information paper that gives an overview of New Zealand’s security of supply framework. The framework includes the CCS and the stress test regime. The companion information paper:

1. describes the mechanisms within the security of supply framework, and the way they work together to promote reliable and efficient supply
2. reminds participants that they are responsible for security of supply
3. assists stakeholders to make submissions on the consultation papers.

However, we have begun a new project to consider whether the CCS should be extended to retailers that buy electricity from a trader, rather than from the wholesale market directly. These ‘type 2’ retailers are not currently obliged to compensate their customers under the CCS during an official conservation campaign. This is because of complex technical and legal issues around identifying type 2 retailers, not because we did not intend the CCS to apply to them. We are carefully assessing options to resolve these issues.