by guest_hans | Mar 29, 2016 | Energy
A Brief History of the Emissions Trading Scheme (ETS) in New Zealand
In 2008, the New Zealand Government introduced an emissions trading scheme (ETS) for greenhouse gases. It required upstream energy suppliers, the users of imported fossil fuels, and industries with CO2 process emissions, to surrender a New Zealand Emissions Unit, for every tonne of greenhouse gas (GHG) that would be subsequently be emitted. Upstream suppliers pass on the costs of these emission units to downstream users.
The Government was aware that energy-intensive, trade-exposed industries would suffer competitively if they were fully exposed to this cost. It therefore provided a free allocation of up to 90% of the emission units required to these industries. It provided a price cap of $25 for an emissions unit.
Geothermal power Station, near Taupo New Zealand
In 2009, the incoming Government made some amendments to the ETS, in recognition of the effects of the global financial crisis. It reduced the requirement to surrender emission units to one unit for every two tonnes of GHG emitted. It delayed indefinitely the planned phase-out of the free allocation of units to energy-intensive, trade-exposed industries.
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by chris | Mar 10, 2016 | Energy
In the past two years we have seen an unprecedented number of customer switches between retailers taking place within the electricity market specifically the small commercial market.
As the market has become more fluid over the last 2-3 years with the introduction of ASX Energy Futures, it has opened the door to more retailer options or “second tier” retailers where generation is not required for companies to on sell energy to customers. Some of these companies have a very small amount of generation underpinning their retail business however they can grow market share through ASX purchases. The increase of retail participants such as Flick Energy, MegaTel, Prime Energy, Pulse Energy, Switch Utilities and Utilise but to name a few, overall market competitiveness has seen switching trends rising annually between 2009 and 2015. With an expanding retail market it is important for customers to know that all retailers must comply with the Electricity and Gas Complaints Authority (EGCC) and that consumers have a number of guaranteed rights when dealing with their utility suppliers.
The below graphic shows total monthly switches that have taken place from 2004 to 2015. We can see from 2009 switching trends rising to double the number of monthly switches seen in the previous 5 years from 2009.
As a result customers are reporting that they are increasingly confident in a competitive energy market place as outlined in the below graphic.
With the advent of new energy retailer companies and various product offerings it is important that customers understand their rights if a dispute arises.
Picking the winners
There have been clear winners amongst the various retailers in the switching war we have seen over the past two-three years, who have capitalised on customers desire to seek out the “best offer” available in the market, while other retailers have struggled to keep up the pace in the increasing competitiveness of the market.
While past trends have showed retailers using high credits to entice customer to switch to them, the new “trend” we can observe in the market place is to offer high prompt payment discounts, with highly competitive rates, provided the customer locks in for a two/three year term with fixed pricing on the retailer (contestable) portion of the rates.
Small commercial customers have typically preferred to go for uncontracted offers in the past however more and more customers are seeing the benefits of securing good deals in a competitive market by locking into fixed pricing for a 24 or 36 month term.
With this in mind once a retailer has been able to win a customer, they must be able to provide a high quality level of service, while still offering the best deal possible. Ultimately the greatest test of a retailer’s service is how they deal with difficult situations and complaints that can arise within the customer-retailer relationship.
Resolving Disputes: Your Rights with the EGCC
Aside from getting a better deal, the other main reason customers will switch from their incumbent supplier is due to dissatisfaction with the current service they are receiving. Service offered between retailers will differ given different billing systems, procedures and organisational culture unique to each retailer.
When it comes to the handling of complaints or disputes there is a set process that all retailers and lines companies must follow as they are all members of the Electricity and Gas Complaints Commission (EGCC). It is important to highlight that most retailer standard terms and conditions require that any line item charge that is not in dispute is required to be paid by the due date of any invoice.
One of the most frustrating parts of having a complaint for customers is the time it can take for this to be resolved, sometimes weeks or even months. It is important to be aware of the fact that retailers have set time standards in which disputes should be resolved, outlined below:
- Retailer is to acknowledge your complain in writing within 2 working days (excluding delivery time.
- Retailer will respond to you within 7 working days to inform you of the steps they will take to reach a resolution.
- Retailer will attempt to resolve your complaint within 20 working days. In cases where it may take up to 40 working days to resolve they must explain in writing why it will require more time to resolve.
Under the EGCC scheme a complaint is considered to have reached “deadlock” if:
- It has taken longer than 20 working days to resolve the complaint and the customer was not notified in writing that they have good reason to extend the time for resolving the complaint; or
- It has taken longer than 40 working days to resolve the complaint; or
The EGCC is satisfied that:
- The retailer has made it clear they intend to do nothing about the complaint
- You (as the complainant) would suffer unreasonable harm from waiting longer, or
- It would be otherwise unjust to wait any longer.
If you are dealing with a complaint and you believe it has reached “deadlock” stage it is important to raise this with the EGCC within 2 months from when you consider it to have reached “deadlock” stage.
What can the EGCC look into?
The EGCC can look into almost any complaint about an electricity or gas company, with common complaints being around bills, meters, disconnections, and damage to property. The EGCC can also be used for complaints about the actions of staff or contractors while on land, as well as access to and use of land on which there is electricity or gas equipment.
The EGCC can also check if a company has provided accurate information about its tariffs and applied them correctly, but cannot look at complaints about the level of pricing for electricity or gas.
Once the EGCC has been approached about a deadlocked complaint they will act as a conciliator between you and the company with the aim of reaching an agreement on a fair and reasonable outcome for the dispute. As part of this process it could include:
- Taking part in a teleconference with the retailer and an EGCC conciliator
- The EGCC seeking expert advice about technical or legal issues
- Investigating the facts of the complaint – the EGCC will seek information about what happened from you and the retailer
Once their investigation is complete the EGCC will provide a summary of facts and its recommended resolution to the complaint to both the customer and the retailer.
Resolution and Settlement in the EGCC Process
If you as the customer accept the recommended resolution as full and final settlement but the retailer does not, the Commissioner can make the decision binding on the retailer. If you do not accept the recommended resolution then the complaint is considered closed and you will need to take the complaint to another forum such as the District Court or, if the company is a state owned enterprise, the Office of the Ombudsman.
While it is hugely advantageous for customers having the EGCC as an available forum for resolving disputes it is important to be aware of the fact that this process can take several months to reach completion which can be costly in terms of time spent in discussion with all parties involved and can be very frustrating at times dealing with the constant back and forth between each party. Particularly for large corporate businesses the cost of time spent can be several thousands of dollars in lost time of staff dealing with the process.
Who can help?
With these facts in mind it is highly advantageous to have industry experts like Total Utilities advocating on your behalf to navigate through this process which will save you both time and money having to deal with the process for you.
Typically complaints start of as small issues which go unnoticed which grow into big problems. Businesses can circumvent these issues by being signed up as a managed service client with Total Utilities as we will monitor your monthly invoices, cost and usage and reporting this to you in highly useful report summaries each month. As part of this process we proactively identify potential issues and resolve these immediately with the retailer ensuring minimal disruption to your utility accounts.
If you would like more information on having your utility accounts managed by Total Utilities please call us on +64 9 576 2107 or email at [email protected] to speak to an industry expert.
1 Source: Electricity Authority
2 Source: Energynews, 2014 – http://www.energynews.co.nz/news-story/17105/consumers-show-increased-confidence-retailer-competitiveness
3 Source: EGCC Annual Report 2014-2015 – http://www.egcomplaints.co.nz/media/248011/egcc.ar.15.final.pdf
by RichardGardiner | Sep 1, 2015 | Energy
Article extract from the September issue of Business Plus Magazine published by the EMA.
The Changing Face of Electricity Supply Worldwide: Can NZ Compete?
By Richard Gardiner and Hans Buwalda
New Zealand is advanced on a global scale in generating most of its electricity from renewable sources rather than the less clean, non-renewables such as coal and other fossil fuels.
But in committing to do better, there is an economic price to pay.
New Zealand is a small, advanced but geographically remote First World economy. Renewable electricity generation based on the use of hydro-electricity, geothermal energy and wind power, etc, typically accounts for about 85 per cent of New Zealand’s total electricity generation.
The proportion of renewable sources has been growing steadily in recent years, with the commissioning of new geothermal and wind power stations and the progressive retirement of aging coal and gas-based generation. This trend now includes the planned closure of Contact Energy’s gas-fuelled Otahuhu B Power Station.
With such a high existing renewables component, it is much harder for us to achieve significant reductions in our electricity-related CO2 emissions/kWh than it is for larger, less remote trading partners overseas.
World catching up
Governments are committed to creating a new international climate agreement at the United Nations in Paris this coming December. In preparation, governments have agreed to publicly outline what climate actions they intend to take post-2020. These are their Intended Nationally Determined Contributions (INDCs), which will largely determine whether the world achieves an ambitious 2015 agreement and is put on a path towards a low-carbon, climate-resilient future.
In its INDC, New Zealand has committed to reduce GHG emissions to 30 per cent below 2005 levels, in the next 15 years by 2030. The likely cost to the New Zealand economy of meeting the 2030 target in terms of GDP is greater than that implied by other governments’ targets. This is due to a number of factors, such as already achieving a high (+/- 85 per cent) level of renewable electricity generation, plus the fact that almost half of New Zealand’s emissions originate from agriculture.
The emission reduction pathways on which other countries’ targets are based differ from the pathways possible for New Zealand.
A significant part of both the US and the EU commitments is based on opportunities for reducing the carbon-intensity of electricity generation. The current proportion of electricity generated from renewable sources in the US is 13 per cent, and in the EU is 25 per cent. Clearly there is significant scope for CO2 emission reductions in both those major economies through further increases in renewable electricity generation, particularly as much of that will substitute for electricity currently generated from coal.
Already, the mix of renewables and non-renewables used in electricity generation is changing globally.
Back in May, BloombergBusiness in the US reported that, “The race for renewable generation has just passed a turning point. The world is now adding more capacity for renewable power each year than coal, natural gas and oil combined”.
It also advised that, “solar power makes up less than 1 per cent of the electricity market today but could be the world’s biggest energy source by 2050 according to the International Energy Agency. The question is not if the world will transition to cleaner energy, but how long it will take.”
The New Zealand emissions trading scheme (ETS) is due to be reviewed this year. Achievement of our INDC highlights the need to address our domestic policies. It is clear the current ETS will not, on its own, ensure New Zealand’s progression to a sustainable, low-carbon economy.
Supporting sector-specific policies and measures are also required. It may be that some sectors should be included in a different way in the ETS.
Tips for NZ businesses
New Zealand business customers of electricity and gas need to focus on:
• Price minimisation – by checking the market systematically via a professional procurement process and bulk purchasing power.
• Usage optimisation – by monitoring usage in detail, highlighting potential kWh reductions and then taking effective action utilising energy specialists.
• Wider environmental considerations (for large organisations at least).
Large organisations, whether public or privately-owned, need to consider their environmental impact on the wider community, and especially their contribution to lowering greenhouse gas emissions (GHG), particularly CO2.
Richard Gardiner is managing director of Total Utilities Management Group Ltd, email [email protected]
Hans Buwalda is managing director of Environment Health & Safety Consult, email [email protected]
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by chris | Aug 25, 2015 | Energy
The New Zealand energy market is shifting sands once more with recent announcements concerning the future of energy generation.
Following the new deal for the Tiwai Point aluminium smelter with Meridian, Contact and Genesis, a series of announcements have been made regarding our thermal baseload generation.
Contact has been quite vocal about the recent announcements with chief executive Dennis Barnes saying “The role of thermal plant in New Zealand’s electricity future is to support renewable generation and the growth of new technologies. This is best met by fast-start, gas-fired peaking power stations rather than large base-load plants.”
Genesis announced the intended 2018 closure of the remaining coal turbines at Huntly. More recently Contact has announced that Otahuhu B will be closed next month. Last week’s set of announcements were concluded by Genesis announcing the cancellation of their Solid Energy contract for the supply of coal, coming on the back of Solid Energy being placed into administration.
The big change was the decision to close and or reduce thermal generation stemmed from the energy market as opposed to government legislative intervention. (more…)
by chris | Aug 3, 2015 | Energy
The news announced this morning ends the worst kept secret of the electricity industry in New Zealand. Months of speculation has been concluded with this morning’s announcement that NZAS will continue to operate Tiwai Point with extra hedge contracts being provided by Contact Energy and Genesis Energy. The deal will provide NZAS with greater certainty if Meridain’s hydro lake storage drops to low levels during summer periods in the future. This will no doubt have a flow on effect to the commercial market as there is now certainty regarding the future of Manpouri and the ongoing viability of thermal plants such as Contact’s Otahuhu B and Genesis’ Huntly power stations.
Energy News has posted the following:
New Zealand Aluminium Smelters has opted to retain its contracted supply cover with Meridian Energy.
A variation to the agreement between the two companies commits Meridian to cover the full 572 MW currently used at the smelter from January 1, 2017. The new deal will see that cover provided at more competitive rates for the smelter than would have applied if NZAS chose to rely on the previous arrangement.
“This variation will give the smelter the flexibility to operate at current production levels for the full contract period should it want to and provide Meridian with an improved overall price for its electricity,” chief executive Mark Binns says.
The Tiwai Point smelter at Bluff is the country’s biggest electricity consumer. The site can use up to 630 MW of power but has been running only three of its four pot lines since early 2012 when record-low South Island hydro storage sent wholesale prices soaring.
Tiwai is currently using about 572 MW annually, fully-hedged under a new lower-priced deal it agreed with Meridian in August 2013.
But that deal, signed in the lead-up to Meridian’s listing, required the smelter to reduce its cover to 400 MW from January 2017 or have its entire supply return to the higher electricity prices set in a new contract settled in 2007.
Contact
Under the deal announced today, the price on that supply will increase. Meridian describes it as a “blend” of the agreed post-2017 price on 400 MW of load and a more market-related price for the balance. Prices also increase if the New Zealand dollar value of global aluminium prices rise above certain levels.
Today’s deal will also see Contact Energy provide Meridian with a financial contract for 80 MW of supply to help guarantee its hedged position.
The Contact deal will apply for at least four years and a maximum of 14 years commencing from January 2017. It also includes provision of associated risk management from Meridian to Contact under certain limited circumstances.
Genesis Energy has also agreed to provide Meridian with 50 MW of financial cover from Huntly for two years starting in 2017.
Meridian is committed to cover Tiwai Point’s electricity usage at current production levels through to 2030, but NZAS retains all its termination rights from the 2013 round of negotiations, which includes a 12-month notice of termination that can be given any time from January 1, 2017.
New Zealand Aluminium Smelters has said it wants to keep operating here and has been sounding out other generators about providing a hedge over the other 172 MW of supply. It previously negotiated an additional summer supply from Meridian but was unable to utilise that due to the impact on the smelter’s transmission bill.
Predictions
More than 60 per cent of participants in an Energy News poll had expected the smelter to keep operating at 572 MW. Just 13 per cent thought the smelter would close in 2017; 25 per cent thought NZAS would drop its load to 400 MW.
Twenty-two per cent of participants thought a deal would be announced with Contact and Genesis – the two companies most exposed to lower wholesale prices if the smelter was to reduce its demand.
On the plus side for the smelter, the weaker New Zealand dollar is offsetting much of the recent price weakness. Longer term, changes to transmission pricing proposed by the Electricity Authority should also deliver big savings for the site.
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by Jonathan Gardiner | Jun 2, 2015 | Energy
The Gas Industry Co has issued the latest update of The New Zealand Gas Story – the State and Performance of the New Zealand Gas Industry. The third edition of this publication can be found here.
Notable elements of the update are:
• The Report updates current statistics and other information from a variety of published sources. Due to the staggered nature of formal disclosures the Distribution section will be updated when all latest Distribution Network disclosures are to hand at the end of April.
• The Gas Pricing section incorporates extended discussion of the wholesale gas market with additional information flowing from the operation of the wholesale trading platform.
• A variety of recent reports have fed into extended discussion of gas supply and demand scenarios, and the opportunities and challenges they may present.
Overall, the Report notes that the gas industry continues to be in good health, although it faces some headwinds:
• The total market has grown on the back of a return to full three-train methanol production at Methanex.
• Increased petrochemical demand is offset by a continuing trend towards a gas ‘peaking’ role in electricity generation, with a resulting further reduction in gas use for baseload generation. At the same time broader retail market demand is relatively flat.
• Fall in international oil prices is inevitably affecting New Zealand upstream investment, especially because New Zealand exploration is targeted mainly at oil. Smaller explorers and producers are particularly affected. Oil prices will continue to change within the longer horizons of the New Zealand gas story, however, and new and large investors continue to be attracted to New Zealand through the block offers regime.
• An intensive exploration effort in the last few years has to date not yielded the significant new discoveries that many hoped for. But the domestic gas markets have seen a lift in reported reserves levels in the past year from further development of existing fields, and new figures on ‘contingent’ reserves from those fields signal significant further potential.
• Downstream, gas consumers continue to be well-served and customer numbers are growing. Consumers have a good and expanding choice of retailers with recent new entrants strengthening an already competitive market. And the emsTradepoint wholesale market is gaining traction, with increasing market participants and volumes traded.
• Existing gas infrastructure is expected to carry the industry forward in the foreseeable future, pending any future step change in the form of a major new discovery or a substantial new demand source.
For more information about the Gas Industry Co please click here.
