The desire to "reboot" the New Zealand electricity supply industry is understandable, but it is almost certainly not the best course of action. As a participant in many electricity industry restructuring processes around the world, one important lesson that I have learned is that all reforms start with significant unintended defects that can only be eliminated through a rigorous ongoing analysis of market outcomes and targeted regulatory reforms.  

Many features of the current industry are consistent with international best-practice and a number of positive changes have been implemented since I completed my report for the Commerce Commission in 2009.

Continuing these efforts to identify and fix flaws in the existing market is likely to provide greater long-term benefits than undertaking a major restructuring of the industry.

Last week, Stanford's Board of Trustees announced that the university would not directly invest funds from its endowment in coal mining companies.  Even the strongest advocates of this action acknowledge that it is a symbolic gesture with little direct effect on the coal industry or global greenhouse gas emissions.  But if a university administration wants to take symbolic (or real) action on climate change, is coal investment a wise choice?

This paper identifies the major political and economic constraints that impact the demandside of electricity industry re-structuring processes. It then describes how these constraints have been addressed and how this has harmed market efficiency and system reliability. Finally, the paper proposes demand-side regulatory interventions to manage these constraints in a manner that limits the harm to wholesale market efficiency.

This report points out a number of aspects of the existing electricity market design in Colombia that could be contributing to the periods of high short-term prices observed several times since early December of 2008. These issues are classified into four broad categories: (1) system-wide market power issues, (2) local market power issues, (3) market monitoring issues, and (4) broader electricity market issues.

This report proposes an ancillary services payment mechanism for the Chilean electricity supply industry. This is accomplished in three steps. The first section presents a set of economic principles for assessing the likely performance of candidate ancillary services payment mechanisms in the context of Chilean electricity supply industry. The second section uses this framework to assess the likely performance of the ancillary services payment mechanism recently proposed by the National Energy Commission (NEC) in its letter Number 715 dated September 21, 2010. The third section formulates an alternative payment mechanism that respects the existing electricity market structures and rules in Chile, but is likely to provide lower cost and more reliable solution than the one proposed by the NEC. An appendix outlines several examples of how the proposed procurement mechanism could be implemented and how potential exercise of market power by a dominant supplier of any ancillary service could be mitigated.

In this report we identify the key drivers of observed market outcomes in the Colombian electricity supply industry during the fourth quarter of 2015 and first quarter of 2016, the time period covered by the most recent El Niño Event. We analyze how effective the market rules and market structure of Colombian electricity supply industry are in managing El Niño Events. The performance of the Reliability Payment Mechanism (RPM) is a major focus of this report because of its designation as the primary mechanism for ensuring an adequate supply of energy at a reasonable price during El Niño Events. We find that the RPM creates a number of perverse economic incentives for supplier behavior, particularly if suppliers have a significant ability to exercise unilateral market power, that works against the RPM mechanism ensuring an adequate supply of electricity at a reasonable price during El Niño Events. We identify several features of the RPM that make it extremely challenging even for a modified version of this mechanism to achieve its goal. We propose an alternative mechanism for ensuring an adequate supply of energy at a reasonable price during El Niño Events that should be straightforward to implement under the current market design in Colombia.