Advocacy Report Reader

Levi Gibbs

Published: January 23, 2023

Submitting To: The Economic Development, Science and Innovation Select Committee

Issue for Business: The Bill is amended in two consequential ways. First, it gives the Commerce Commission the power to investigate competition within New Zealand's fuel industry, and subsequently recommend introducing price regulations. Second, it gives the Minister the ability to impose price regulations, that could be the same as, or different to, the Commission's recommendations. BEC is strongly opposed to the amendment to Bill. To start with, BEC believes that there is inadequate evidence to demonstrate uncompetitive behavior on behalf of fuel suppliers. The amendment gives the power of price controls. BEC is opposed to implementing price controls. BEC's submission outlines the vast negative and unintended consequences that often arise from price controls. The Bill lacks any cost and benefit analysis, including no terms of reference. BEC is concerned that the price of fuel risks being set by political pressures, rather than more efficient market forces. The Bill will likely worsen competition, as artificially lower prices do not send a signal to potential competitors to enter the market. Price ceilings increase demand, and in this case is contradictory to New Zealand's aspirations of reducing fuel consumption, and meeting the climate target of net-zero by 2050.

Outcome: Ongoing. The Bill still sits in the Select Committee.

Levi Gibbs

Published: January 11, 2023

Submitting To: Environment Select Committee

Issue for Business: The Sustainable Biofuel Obligation proposed that fuel suppliers had to reduce their emissions by at least 1.2% in 2023, and increase their reductions out to 2030, by using blended biofuels. In BEC's original submission in July 2022, BEC outlined that the obligation's start date April 1 2023, provided insufficient time for suppliers to build the necessary infrastructure and inform consumers on the safety of biofuels. We recommended at least a two year delay, or a reduced target in the initial years. Following BEC's July 2022 submission, the Government extended the timeline for the biofuels implementation by one year. The new starting date will be April 1 2024. However, the reductions target for year one would increase from 1.2% to 2.4%. This places significant strain on the industry to source limited global supply. The proposal has been introduced in parliament. BEC's submission reiterates the tradeoff between implementing this obligation and price. Among many other factors mentioned in this submission, BEC states the lack of clarity given about the exact sustainable nature of international supply. Land use change and feedstock uncertainty must be addressed.

Action: We spoke at the select committee about the submission, outlining the potential cost to consumers and the problems of global supply constraints, and the estimated supply concerns in the future. We reiterated the significant cost of updating infrastructure and flow on cost.

Outcome: The Government decided to abandon the Sustainable Biofuels Obligation due to cost of living considerations.

Levi Gibbs

Published: December 14, 2022

Submitting To: Electricity Authority

Issue for Business: The Electricity Authority (EA) decided to investigate competition in New Zealand's wholesale electricity market after sustained high prices since 2018. The EA launched this investigation in 2020. The Authority wanted to know if there was a problem with competition in the wholesale market, and if there was a problem, they wanted to know what extent does anti-competitive behavior led to insufficient generation and high prices.

Action: BEC has written a submission generally supporting the Authority's findings -- that higher prices were caused by underlying supply and demand conditions, not competition. We supported the vast majority of the Authority's recommendations which included actions to invite other Ministries to act on policy uncertainty, capital investment

Outcome: The Authority concluded that sustained higher prices over the observation period, between 2018 to 2021, was likely explained by underlying supply and demand conditions. The Authority concluded that there was insufficient evidence to justify significant intervention and structural change. The Authority believed substantial changes would create uncertainty , and most likely lead to lower levels of generation and thus higher prices. BEC supported the EA's conclusions. However, BEC acknowledges the significant higher prices paid by users in the last three years. This is a large risk for New Zealand's competitiveness. We are also open to investigating additional market structures, such as capacity mechanisms, as sufficient capacity is increasingly becoming a problem, as the price of carbon and thermal increases into the future.

Published: October 31, 2022

Submitting To: Electricity Authority

Issue for Business: In August 2021, the Electricity Authority (EA), in conjunction with their review into the wholesale market, released a paper on the possibility of Inefficient Price Discrimination within very large contracts of electricity, in particular, contracts with 150MW>. The EA believed contracts like Tiwai resulted in higher bills for consumers. BEC submitted that there remains insufficient evidence to prove this claim. The EA announced intervention in August this year, with a proposal to amend the code.

Action: BEC responded to this proposed code amendment in opposition for four reasons. Firstly, it would likely create uncertainty and regulatory risk, hurting investor sentiment in New Zealand (an extra barrier to investment in matters like hydrogen) . Secondly, the proposal was overly and unnecessarily intrusive, especially clause 13.271, which allows the EA to request ANY information. Thirdly, the proposal limits contractural freedom. Lastly, there remains insufficient evidence to prove generators sell below cost.

Outcome: Awaiting the Authority's decision