Electricity Market Regulatory Reform and Competition – Case Study of the New Zealand Electricity Market

Daisy Shen and Qing Yang ()

Chapter 6 in Energy Market Integration in East Asia: Theories, Electricity Sector and Subsidies, pp 103-140 from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: All around the world, electricity market reforms involve various forms of unbundling previously vertically integrated state-owned or privately owned electricity monopolies. New Zealand is the only country in the developed world that has implemented forced ownership unbundling of electricity distribution and transmission activities from the rest of the electricity network. The Electricity Industry Reform Act 1998 (EIRA) strictly prohibited distribution businesses from being involved in either generation or retailing activities. However, the strictownership separation between distribution and generation was relaxed not long after the enactment of this legislation. In 2010, the New Zealand government enacted the Electricity Industry Act 2010 (EIA), which revised the strict ownership separation between distribution and retail by allowing distribution back into retailing, and relaxed further the separation between distribution and generation by raising the threshold further for ownership separation between distribution and generation. This study will review the New Zealand reform experience, examine the market structures resulting from ownership unbundling, and evaluate the impacts of ownership unbundling on the performance of the electricity sector. It will also explore the rationale underlying recent reforms that allow re-integration, and to gauge the impact of the recent reforms.

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