Levi Gibbs

Published: February 28, 2023

Submitting To: Ministry for the Environment (MfE)

Issue for Business: MfE has outlined options to regulate NZU market based on financial legislation, including the regulation of NZU advice and transactional services, and disclosure of transaction reporting. The consultation document also raises the possibility of establishing a Government-run/funded NZU exchange. The Ministry seeks consultation on this option. In regards to forming a centralized exchange, BEC believes this option is clearly beyond regulation, and is a direct intervention in an already established market. The intervention could lead to a significant market disruption and confer market power on the chosen exchange operator. Moreover, there remains little to no evidence that there is a problem with the existing incumbent exchanges. Regulating NZUs may add additional costs for participants, creating compliance burdens in the form of ongoing fees and license requirements. This could mean less liquidity and deter market entry. There remains a lack of clarity on whether the regulations will not restrict contractual arrangements for NZU supply, including offtake agreements and contractual opt-in arrangements between energy suppliers and users. BEC is pleased to see that the original proposal to have potential position and purchasing limits has been dropped. The option to improve transaction reporting has merit. However, there is no clarity on how information will be consolidated and published publicly. BEC does not support option three, full transaction reporting, as the confidentiality of commercially sensitive information is vital. Aggregate data should only be used, not organizational/individual data should be disclosed.

Outcome: Awaiting the Government's decision