In the news
Electricity Authority releases wholesale market information disclosure consultation paper
The Electricity Authority (EA) recently published its wholesale market information disclosure: review of thermal fuel disclosure consultation paper (Paper) (available here). Recent events and reviews highlighted that the availability of thermal fuel information is a key concern, and led to the EA reviewing the thermal fuel information disclosure rules. The Paper seeks feedback on the EA's proposed actions to improve the availability of thermal fuel information.
The Paper provides four key proposals aimed at ensuring the Code's disclosure requirements are being met and making thermal fuel information easier to find and use. These include:
- An amendment to the Code introducing mandatory quarterly reporting of disclosure activities and annual certification by some participants. The EA believes this will ensure that those participants consider their clause 13.2 obligations (ie misleading, deceptive, or incorrect information), and provide information to facilitate monitoring and compliance.
- Updating the thermal fuel disclosure guidelines to provide greater clarity regarding disclosure obligations and to reflect recent developments. For example, the fact that gas producers now disclose all planned outages does not override electricity participants' obligations under clause 13.2A (disclosure information must be made readily available).
- Raising awareness of existing disclosures. For instance, through a disclosure reference webpage, which links to published information.
- Clarifying where parties should disclose information regarding their availability being impacted by a fuel constraint (eg via a centralised website such as the wholesale information and trading system).
The EA considers that thermal fuel information is a key driver of electricity prices. As such, the EA expects that these proposals will increase visibility of market activities, and enable participants to better manage risk, with the overall result of benefiting consumers in the long-term through prices that are more efficient.
Interested stakeholders should make a submission by 5pm, 1 September 2020.
Whilst the EA considers thermal fuel information to be the most pressing issue, it acknowledges that other information disclosure issues, not specifically related to thermal fuel, must also be addressed. The EA will address these other issues in the second phase of the project, scheduled for the 2021/2022 financial year.
Investment into "Pumped Hydro" option to support a renewable grid
The Government has announced it will investigate options to "green the grid" in order to pursue its goal for 100% renewable electricity generation. The Government will fund the close examination of a key recommendation by the Interim Climate Change Committee to develop hydro schemes that pump water into reservoirs as a "battery", which can be used to generate electricity at peak demand, during dry hydrological years, and to manage the intermittency of renewable energy (such as wind).
The Government has allocated $30 million to develop a business case for a solution to address New Zealand's dry year storage problem. The analysis will mostly focus on a "pumped hydro" storage project at Lake Onslow in Central Otago, but will also include the assessment of smaller potential locations in the North Island, as well as other alternative technologies. It is estimated that it would take about four to five years to build and two years to fill the reservoir at Lake Onslow, which would amount to a multi-billion dollar project for which separate funding would be required.
The Government also announced a further $70 million investment to increase electrification of industrial and process heat in the lower South Island, with transmission line upgrades, and direct support to industrial users to convert their coal boilers to electricity.
The Minister's press release is available here.
Independent review of the New Zealand Defence Force's Operation Respect
In mid-July, the New Zealand Defence Force (NZDF) issued its report on its Independent Review on the NZDF's progress against its Operation Respect Action Plan (Report).
Operation Respect was launched in 2016 as an organisation-wide programme to eliminate harmful and inappropriate sexual behaviours in the NZDF and improve the culture of 'dignity and respect'. Key objectives included increased training and education, improvements in sexual assault reporting processes and responses, recruiting more women, and reducing discrimination, harassment and bullying.
The Report outlines 44 recommendations to address issues identified, including:
- requesting that the Auditor-General audits the NZDF's progress every two years;
- considering the steps towards establishing a Defence Ombudsman to receive and process complaints; and
- creating an integrated data management system to collect data and report on complaints and outcomes.
The Report also noted that the work must continue and that it is imperative that the New Zealand public has trust in the NZDF and a measure of that may be that its people work in an internal environment free from unnecessary harm.
Hon Ron Mark, Defence Minister, said that the review was critical and clearly outlines there is more work to be done – noting that New Zealand's Five Eye partners are also struggling to address similar issues in their militaries, as are other Government agencies. The Minister has said that the NZDF has already initiated contact with both the Ombudsman and the Auditor General to discuss potential options and that the NZDF are now focused on addressing the recommendations in the Report.
A full version of the Report is available here. The Minister's press statement can be found here.
Ombudsman's report into prisoners' rights during COVID-19
The Chief Ombudsman, Peter Boshier has acknowledged that prisons are taking positive steps to keep COVID-19 out, but this has come at the expense of some prisoners' rights. This follows the release of a report summarising the results of an independent inspection under the Crimes of Torture Act 1989, which addresses New Zealand's obligations under the United Nations Optional Protocol to the Convention against Torture (OPCAT).
The Ombudsman inspected nine prisons from 29 April 2020 to 8 May 2020 (while New Zealand was at Alert Level 3). Inspectors observed generally positive relationships between the staff and prisoners, and noted enhanced health and safety processes were in place and effectively communicated. Prisons had taken measures to support prisoners maintaining contact with the outside world.
Recommendations for improving conditions and treatment were made in relation to seven of the nine prisons. Concerns were raised about some prisoners in some units at four prisons, who were not receiving access to at least one hour of fresh air per day, or given activities to occupy their time. This was especially the case for prisoners who had been placed in medical isolation (either as new arrivals in prison, or due to suspected COVID-19 symptoms). However, it was also an operational issue for all prisons – due to the protections established between "bubbles".
A full version of the report can be found here.
Update on Phase 2 reform of the Reserve Bank
Finance Minister, Hon Grant Robertson has introduced the Reserve Bank of New Zealand Bill, which would make changes to the Reserve Bank's governance and accountability. The Bill is expected to be read for a first time after the election.
The Bill is part of the Phase 2 reform to the Reserve Bank Act in relation to the Review of the Reserve Bank announced by the Minister in 2017. Phase 1 (completed in 2018) introduced "supporting maximum sustainable employment" as an economic objective for the Reserve Bank; and created a Monetary Policy Committee with the responsibility for formulating monetary policy.
The relevant key changes in the Reserve Bank of New Zealand Bill are:
- Moving from a single decision maker model, to a board model.
- Amendments to the Reserve Bank’s accountability and reporting frameworks to better align with state sector practice.
- Setting out matters that the Reserve Bank board must have regard to when setting, and implementing, its strategic approach to financial stability.
- Requiring the Reserve Bank and the Minister to agree on a Foreign Reserves Management and Co-ordination Framework.
- Changes to the funding model to allow for recovery of costs through industry levies and fees.
- Providing the Council of Financial Regulators with a statutory mandate, which relates to the regulation of the financial system.
- Expanding the Reserve Bank’s functions in respect of cash, including supporting public confidence in banknotes by enabling the Reserve Bank to set standards for devices that check the authenticity and/or quality of banknotes.
Further work under Phase 2 is focused on the introduction of (among other things) a new deposit insurance scheme for New Zealand. Due to the impact of COVID-19, consultation on this tranche of the reform has been extended until 23 October 2020 and reforms are not expected to be introduced to Parliament until 2021.
The Treasury's consultation page is available here.
New mandatory labelling rules for alcohol
Food Safety Minister, Hon Damien O'Connor, recently announced that New Zealand is introducing mandatory pregnancy warning labels on alcohol products.
New Zealand shares a Food Standards regulatory system with Australia so decisions on labelling must be made jointly by the Australia and New Zealand Ministerial Forum on Food Regulation (Forum). On 17 July 2020, the Forum accepted the proposed draft standard for pregnancy warning labels, which was gazetted on 31 July 2020, and is now reflected in changes to the Australia New Zealand Food Standards Code.
Since 2011, the alcohol industry has implemented a voluntary pregnancy warning labelling scheme. However, there is no consistency in the type, colour, size and design of the warnings. Other countries, such as the United States and France, legally require pregnancy warning labels on alcohol, and Minister O'Connor has said New Zealand and Australia will now align with that.
The new pregnancy warning labels must be printed in red, black and white. Depending on the size of the alcoholic vessel, the labels must either read "Pregnancy Warning", show the pregnancy warning mark (the pregnancy warning pictogram, the signal words "Pregnancy Warning" and the statement "Alcohol can cause lifelong harm to your baby") or the pregnancy warning pictogram.
The Minister describes the changes as an action taken to reduce the harm caused by Foetal Alcohol Spectrum Disorder.
The changes to the Food Standards Code provide for a three-year transition period to enable businesses to make the necessary modifications to their labels and processes. The changes take effect 36 months from 31 July 2020.
Report on Auckland Port Relocation
In July, the Government released a report, which was undertaken by Sapere and commissioned by the Government, to inform decision-making on the relocation of the Port of Auckland's freight operations. The report considered five relocation options: Northport, Manukau, the Firth of Thames, the Port of Tauranga, and a shared increase in capacity for Northport and the Port of Tauranga.
The report follows the position from the Upper North Island Supply Chain Strategy Independent Working Group, which identified Northport as the preferred option. The Ministry, along with the Treasury and the Provincial Development Unit, agreed to undertake further work to inform a decision.
Key findings of the Sapere report are:
- The Port of Auckland currently has 30 years' capacity – which allows a 10-15 year decision-making window.
- Neither Northport, nor the Port of Tauranga, on their own would pass the gateway test (ie a minimum of 60 years capacity, allowing for a reasonable rate of growth).
- Manukau Harbour was the highest ranked option – to provide sufficient long-term port capacity at least cost.
- The economic costs would outweigh the economic benefits for all options.
- Obtaining consents for any activity that involves coastal environments would be highly challenging. Timeframes for planning and consenting are estimated at 5-7 years for an existing port and 7-10 years for a new port.
- The large-scale investment and consenting challenges mean that it may be tempting to stay put on the Waitemata Harbour, but a delay in taking a decision will make an eventual shift more difficult.
The report advises that a detailed feasibility study will be needed to test and confirm a range of details relating to port design, commercial arrangements, coastal engineering, landside infrastructure requirements, coastal planning and consenting details, as well as undertaking full engagement with stakeholders.
A full version of the report is available on the Ministry of Transport's page here.
FMA outlines short-term priorities in response to COVID-19
On 27 July 2020, the Financial Markets Authority (FMA) released an information sheet on its short-term priorities over the next three to six months as New Zealand responds to COVID-19. The sheet noted that the COVID-19 pandemic has had, and will continue to have, a significant impact on the economy. The FMA is focused on ensuring that the financial sector is well-positioned to respond to these future challenges and to support customers and investors.
The FMA's immediate priorities are intended to promote fair, efficient and transparent financial markets, and contribute to the country's economic recovery, through:
- supporting investors and customers and highlighting risks and issues;
- providing ongoing support to entities and working with firms to help them respond to the impacts of COVID-19;
- identifying and addressing misconduct, including scams and other predatory practices related to COVID-19;
- responding quickly to market disruptions and significant events;
- setting out its expectations on good conduct;
- progressing the new financial advice regime which begins on 15 March 2021, and other key policy reforms to enhance oversight of financial markets; and
- continuing to work with other members of the Council of Financial Regulators and other agencies to monitor developments and ensure effective responses to system-wide issues.
Key regulatory risks the FMA will focus on in the coming months include:
- engaging with investors and customers to support their decision-making and provide relevant guidance;
- continuing to monitor and engage with market participants and frontline regulators including NZX to ensure fair, efficient and transparent capital markets;
- financial sector resilience and ensuring the FMA is prepared to respond to significant events;
- reintroducing regulatory activities;
- outlining its expectations of industry on the treatment of customers and investors, identifying entities at high-risk of misconduct and addressing and deterring misconduct; and
- responding to scams and fraud, issuing public warnings and alerts to warn investors of potential risks.
The full information sheet can be found here.
Auditor-General Report into Provincial Growth Fund
In December 2017, the Government announced that it was setting up the Provincial Growth Fund (PGF), which was launched in February 2018 with $3 billion to invest over a three-year period. Although typically described as a single investment fund, it is actually a collection of separate initiatives and hundreds of projects that several government departments manage separately.
The Auditor-General's report, released last week, follows a decision to redirect up to $600 million from the Fund to the COVID-19 response package.
The Auditor General found that:
- The PGF was established at pace, which resulted in a number of deficiencies in how appropriations were administered, how conflicts of interest and contracts were managed, and how investments were tracked and reported. These systems and processes have improved over time.
- An Independent Advisory Panel was expected to provide advice to Ministers on the overall balance of investments. It is difficult to see whether the balance sought has been achieved.
- It was not always clear why certain projects were considered for funding. It is important for the public and Parliament to have better visibility of how all parts of the PGF operate.
- Although there have been many announcements relating to individual projects, there needs to be full and relevant reporting about the nature and purpose of the PGF's investments and their impact against the PGF's objectives.
It was recommended that the Ministry of Business, Innovation and Employment:
- further strengthen transparency about the operation of the PGF;
- work with the Ministry for Primary Industries and the Ministry of Transport to enhance consolidated reporting on the PGF as a whole;
- complete and publish, as quickly as possible, a plan for evaluating the overall effectiveness of the PGF.
The Auditor-General publicly expressed his expectation that officials "demonstrate, to the extent possible, the effectiveness of the $3 billion investment".
The full report is available here.
Report into Oranga Tamariki Released
The Chief Ombudsman recently released an investigation report into policies, practices and procedures for the removal of newborn pēpi by Oranga Tamariki (Report). The timeframe for the investigation was 1 July 2017 to 30 June 2019.
Under section 78 of the Oranga Tamariki Act 1989, the Ministry is able to apply for, and be granted, interim custody of tamariki (pending the determination of proceedings) in cases where other options to ensure their safety are not available. Between 1 July 2017 and 31 June 2019, the Ministry received reports of concern relating to over 4000 pēpi. In this period, approximately 300 were removed from their parent's care. Many of these were done on a "without notice" basis – that is, the newborn was removed without the parents and whānau being notified of the decision to seek interim custody. This process is designed to be used only under urgency, where other legal avenues, such as place of safety warrants and truncated notice periods, are not available.
At a high level, the Report found that:
- While the content of the Ministry's overall operating policies and guidance were generally adequate, there were a number of gaps.
- The decision-making practices connected with the removal of newborn pēpi under section 78 were unreasonable.
The Ombudsman went on to make a number of specific recommendations to the Ministry, most of which related to updating and implementing clear guidance and policies to assist with decision-making. The Report recommends that the Ministry report back to the Ombudsman on its progress toward the recommendations on a quarterly basis for the next year, with the first report by 4 November 2020.
A full version of the Report can be found here.