Inefficient Price Discrimination in the Wholesale Electricity Market – Issues and Options

Last updated: December 22, 2021

Energy

Inefficient Price Discrimination in the Wholesale Electricity Market – Issues and Options

Published: December 22, 2021

Stage: Done

Submitting To: Electricity Authority

Issue for Business: Addresses inefficient price discrimination in the wholesale market as there appears to be evidence to indicate that inefficiencies are potentially significant, with material implications for consumers and generators. We agree the Tiwai contract is unique in that it relates to an unusually large amount of electricity, which accordingly might reasonably be expected to receive a cost-based discount. We also agree that demand response provisions are highly valuable and can reasonably contribute to differences in price. We are somewhat surprised that the Issues Paper has focussed on this one-off contract. We do not believe the potential for, or even existence of, price discrimination is a pressing issue. We acknowledge the Tiwai contracts may have discouraged investment in new generation and agree that any such issues are best addressed through a review of barriers to new investment more generally, as the Authority has proposed to undertake in 2022.

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