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Scarcity Pricing and Default Buy Back

Introduction
Scarcity Pricing and Default Buy Back Technical Group (SPDBTG)
Consultation (October 2009)
Default Buy Back Project

Introduction

This project involves the assessment and development of scarcity pricing and default buyback mechanisms for the electricity market.

The project had previously looked at compulsory contract (or capacity contracting) however as a result of submissions this is no longer being considered for the Market Development Program. However the project now includes the development and assessment of a default buy back scheme for residential consumers during a public savings campaign.

Scarcity Pricing and Default Buy Back Technical Group (SPDBTG)

The project has progressed to a stage where we are in a position to consider in detail the merits of introducing scarcity pricing and default buy back arrangements. A technical group has been formed to develop the detailed design.

Scarcity Pricing and Default Buy Back Technical Group (SPDBTG)

Consultation

A consultation paper was published on 9 October 2009. The closing date for submissions was 5pm on Monday 7 December 2009. The Commission received 19 submissions.

The Commission held a conference to provide an overview of this and other MDP consultation documents and an opportunity for industry participants to discuss the options.

Presentations

Default buy-back Project

Background

The default buy-back mechanism, requiring retailers to make payments to consumers in the event of a public conservation campaign and enforced power cuts, is one of the priorities for the Market Development Programme. The project involves the Commission developing a working model for retailers for a default buy-back arrangement to apply if a public conservation campaign is in operation.

The Scarcity Pricing and Default Buy Back Technical group is tasked with providing specialist and technical advice to the Commission on this project.

Project Status

The technical group has met on four occasions since forming in March 2010. As a result it has given advice to the Commission on possible criteria, qualifying aspects and design options. Consequently the Commission has commenced the drafting of a consultation paper.

The commission has also approached retailers through informal meetings to gather concerns and issues from an operational aspect. This information will be part of the ensuing consultation paper and rule changes with a view to get a design in place for winter 2011.

Further concerns, along with solutions need to be gathered so that they can be presented to the technical group for consideration and included in the consultation paper. The intention is to make the consultation process informative and ensure as many points as possible can be addressed or raised.

Industry forum

Prior to consultation, a forum discussing the proposed Default Buy-back design will be held in Auckland on 10 August 2010 at the Ellerslie Event Centre.

The default buy-back is one of the initiatives that is a priority in the Government’s proposed electricity reforms. This forum focuses on three core areas;