(Bloomberg) -- The New Zealand government is considering intervening in the nation’s electricity market to compel energy generators to reduce prices, Associate Energy Minister Shane Jones said.
“For a long time I’ve felt there are some significant deficiencies in the actual structural makeup of our wholesale energy market,” Jones told Radio New Zealand Thursday in Wellington. “The Minister of Finance along with the Minister of Energy are getting some urgent work done to look at what short-term measures can we take if indeed there are some deeper structural failings in the rules and the regulations governing the energy market.”
Wholesale power prices have more than doubled over the past month, according to data supplied by the Electricity Authority, partly because of low hydro lake storage levels. The country is also short of natural gas, and Jones said work is underway on whether to start importing liquefied natural gas or liquefied petroleum gas.
Jones said the energy generators weren’t operating in a competitive manner and accused them of “profiteering.”
“There are provisions under the existing electricity legislation that enables the Crown to use a code of conduct which has legal force to change their behavior,” he said. “That advice is being sought.”
The government holds majority stakes in three of the four big generators — Meridian Energy, Mercury NZ and Genesis Energy. The fourth is Contact Energy.
Mercury Chief Executive Officer Vince Hawksworth said high prices are signaling the increasing risk that there won’t be enough electricity at times over the next few years. He said low-cost generation is needed to back up renewable energy sources when there’s no sun or wind and lake levels are low, and a key part of this is tackling gas supply challenges.
Still, he cautioned against government intervention because it can create uncertainty that could delay investment.
“There is a real risk with any intervention that we accidentally undermine our broader goals and jeopardize the sector’s ability to double renewable generation by 2050,” Hawksworth said. “We need to make sure we are taking a whole-of-system view when thinking about solutions so that we don’t create unintended consequences.”
A Meridian spokesman said the company had no immediate response to Jones’ remarks.
(Updates with Mercury CEO comment from seventh paragraph)
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