DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Introduction: Datamonitor's MCI Index offers a robust framework for measuring the development of energy Market Competitive Intensity 2
The MCI Index shows how attractive a particular market is to new entrants in terms of the competitive environment 3
The MCI assessment draws on nine underlying metrics grouped into three broad clusters: market framework, supplier push, customer pull 3
The MCI Index measures the development of 20 diverse Asia Pacific gas and power markets 4
The MCI Index assesses markets in December 2007, and on July 1, 2010, in addition to driving a market switching forecast 4
Each of the nine pillars has an assessment scale to allow for the comparison of diverse markets (see appendix for more details) 5
Two differing overall MCI scores are calculated to ensure full clarity of results 5
A simple weighted average (additive) measure shows overall competitive intensity 5
A weighted multiple (multiplicative) measure shows overall competitive intensity 5
The MCI framework has a number of applications for your organization 6
Context: New Zealand's gas and power markets both have strong Market Framework and Supplier Push factors 7
The New Zealand power market maintains its ranking over the forecast period 7
The New Zealand gas market is overtaken in terms of competitive intensity during the forecast period 8
Power MCI: The New Zealand power market is characterized by a wide range in its individual metric scores 9
Regulatory effectiveness is a key element of the New Zealand power sector 9
Effectiveness of regulator [2007: 8/10 2010: 9/10] 9
Effectiveness of balancing and data transfer [2007: 5/10 2010: 6/10] 10
Supplier Push scores are in the mid range of the scale 10
Wholesale market fragmentation [2007: 5.5/10 2010: 5.5/10] 10
Retail market fragmentation [2007: 5/10 2010: 5/10] 10
Traded market maturity [2007: 4.5/10 2010: 6/10] 10
In common with many other markets, New Zealand's total score is curtailed by weakness in the Customer Pull metrics 11
Access to market information and assistance [2007: 5/10 2010: 6/10] 11
A new regulatory framework for transmission investments and pricing that enforces the EC to publish a statement of opportunities periodically has been established. This provides for a degree of market information, but considerable progress still remains to be made. 11
Consumer representation [2007: 2/10 2010: 3/10] 11
Gas MCI: Gas market competitive intensity shows improvement over the forecast period 12
The gas market in New Zealand has a strong market framework, which is mainly due to the effective regulations in place and a very effective balancing system 12
Effectiveness of regulator [2007: 4/10 2010: 9/10] 12
The gas and electricity industries were deregulated in 1993. Gas franchisee areas were removed and wholesale gas price controls lapsed; retail price controls had already lapsed by this stage. 12
In October 2004, amendments were made to the Gas Act 1992 to provide for a co-regulatory model of gas governance. The amendment set up an industry body, the Gas Industry Company (GIC), which makes recommendations to the Minister of Energy on improved gas industry arrangements, such as rules and regulations in wholesaling, processing, transmission and retailing. The GIC focuses predominantly on the downstream sector rather than upstream issues, but is increasingly regarded as a 'light touch' in this respect. Overall, the GIC lacks regulatory bite given it is largely an advisory body answerable to the Ministry of Energy. However, all the regulations governing price and non-price issues are in place which should allow the GIC to gain greater autonomy in future. 12
Ease of third party access [2007: 5/10 2010: 6/10] 13
An open access regime exists in New Zealand, allowing non discriminatory access to more than 3,400km of high pressure gas transmission pipelines across the country. New Zealand has two main transmission entities: Vector's transmission network and the Maui pipeline, which is owned by Maui Development Limited. There are more than 2,800km of intermediate, medium and low pressure gas distribution pipeline networks in the North Island, which are connected to the high pressure transmission system. 13
Effectiveness of balancing and data transfer [2007: 5/10 2010: 6/10] 13
Supplier Push metrics remain largely constant over the forecast period 13
Wholesale market fragmentation [2007: 5.5/10 2010: 6/10] 13
Retail market fragmentation [2007: 7/10 2010: 7/10] 13
A wholesale traded gas market does not yet exist in New Zealand. 13
As with many other Asia Pacific countries, New Zealand has weak Customer Pull scores 13
Access to market information and assistance [2007: 1/10 2010: 2/10] 13
Consumer representation [2007: 1/10 2010: 1/10] 14
Consumer representation remains limited in New Zealand in the energy sector. 14
Propensity to switch [2007: 0/10 2010: 0/10] 14
Outlook: Competitive intensity in the power market will continue to outstrip that seen in gas 15
MCI Scores 16
APPENDIX 19
Definitions 19
Ask the analyst 24
LIST OF TABLES
Table 1: Market Competitive Intensity, New Zealand 2007-10 16
Table 2: MCI additive, Asia Pacific 2007-2010 17
Table 3: MCI multiplicative, Asia Pacific 2007-2010 18
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