Chair Dr John Small said it was aware of the difficulties facing the electricity sector, and had thoroughly tested whether the agreement would affect competition.
“We have found the public benefits of these proposed arrangements likely outweigh any potential lessening of competition.”
The 10-year arrangement involves the four gentailers building a 600,000 tonne coal stockpile at Huntly Power Station, and paying Genesis a fee to run its Rankine Unit 2 as ‘dry-year cover’ when other forms of generation, such as hydro, solar and wind may not be sufficient to ensure security of supply.
A so-called “dry-year” occurred last year, sending wholesale electricity prices soaring and forcing emergency measures to avoid shortages.
Genesis had planned to retire the Rankine Unit 2 next year without such an agreement.
Small said the commission granted the clearance under urgency, because maintenance work needed to be completed on the unit ahead of winter.
“It is our view that, as well as improving security of supply, they will lower wholesale prices compared to a future scenario in which (Rankine) Unit 2 is shut down.”
He said the commission would monitor Genesis’s commitment to supply the same price hedges to independent retailers and generators, industrial customers, and financial intermediaries.
Large industrial power users said the regulator’s approval would give certainty to the electricity market.
“The commission’s final determination is a positive step for both consumers and industry. It provides major users with a level of reassurance on security of supply,” Major Energy Users Group executive director Karen Boyes said.
