The Electricity Authority is imposing a new trading conduct rule instead of leaving it to wholesale market participants to interpret what is meant by a 'high standard' of trading conduct.
Photo: Paul Moss Photographer Artist NZ [CC BY-SA 2.5]
Trading conduct rules were designed to ensure appropriate behaviour in the wholesale electricity market, but had failed in a number of cases, according to the authority.
It said the current high standard trading conduct provisions were difficult to interpret and apply to the day-to-day trading processes by market participants.
"The authority is aware some rules may not give the protection and assurance the sector and the public deserve," Electricity Authority chief executive James Stevenson-Wallace said.
"That's why we've made changes to the trading conduct rules. We want to build trust and confidence in the electricity market and the sector by giving certainty in existing and new rules."
The trading conduct rule was expected to prevent big suppliers from taking advantage of their dominant position in what was a relatively small market, while allowing it to signal when there was a genuine scarcity of supply.
The authority considered the changes would make the trading conduct rule easier to understand, comply with and to enforce.
"The previous trading conduct rules were introduced in 2014 and have been repeatedly tested since then. Most stakeholders agree the rules lacked clarity and needed to be revised," Stevenson-Wallace said.
"We expect the new rule to provide clarity and strengthen confidence in the wholesale electricity spot market for the long-term benefit of consumers."
The authority was also concerned about safe harbour provisions, which were being removed as they could lead to situations that were inconsistent with the rules covering trading conduct.
The rule comes into effect on 30 June.