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The Electricity Authority (EA) wants to make permanent a temporary change made under urgency in January this year to the disclosure regime in the Electricity Industry Participation Code (Code).
Submissions on the consultation paper close on 3 August.
Disclosure regime
The regime applies to all electricity market participants – from large generators to distributed energy resource owners – and imposes continuous disclosure obligations in relation to wholesale market information that is about the participant and is held by the participant.
Participants are required to make such information publicly available as soon as practicable, subject to limited exceptions (e.g. if the information concerns an incomplete negotiation or the participant is legally bound to maintain confidentiality).
The clause as first written created an obligation to disclose where the participant expects, or ought reasonably to expect, that the information, if made available to the public, will have a material impact on prices.
But this was changed from will have to likely to have, effective from 29 January and with an expiry date of 5 April 2021 in anticipation of a tight supply situation this year. As the change was made under urgency, the EA was not obliged to consult on it.
The EA was responding to a decision by the Rulings Panel in January this year in which the Panel observed that the will have threshold may be too high.
The EA notes that the change does not represent a change in policy but an attempt to ensure that the wording reflects the EA’s existing policy intent. That said, the EA expects that the amendment will “increase the amount of information classed as ‘disclosure information’”.
Our comment
The EA accepts that a potential downside of the proposed wording will be that it moves the Code further away from the NZX continuous disclosure test.
This has the practical effect of lowering the continuous disclosure threshold for NZX-listed participants – they will now need to disclose information meeting a lower threshold under the Code, even if such disclosure is not required under NZX rules. This may increase compliance costs for companies which are subject to both regimes.
In addition, we expect participants to be concerned that:
- the Code does not define what is meant by a ‘material impact’. It never has, the EA says deliberately because disclosure should be based entirely on the facts. But whether this is still the right approach given the extra scrutiny that the widened threshold will require warrants consideration
- the threshold now requires participants to make an assessment of likely consequences on the market. In its guidance on applying the disclosure requirements, the EA acknowledges that to apply the test, a participant must “exercise its judgement” and that “the holder of the information is in the best position… to exercise that judgement”. Yet, that exercise of judgement will be tested (potentially by a Rulings Panel) in hindsight.
Chapman Tripp will be pleased to assist should you wish to make a submission.
