In its submission to the Ministry of Business, Innovation and Employment (MBIE), MEUG says it supports Government intervention to improve electricity security but believes the proposed long-term reliability obligation is aimed at the wrong part of the market.

MEUG Executive Director Karen Boyes said the responsibility for investing in firm generation should sit with those best placed to deliver it.

"If New Zealand needs more firm generation to manage dry-year risk, then the obligation should sit with generators, not the country's largest electricity users."

"Large industrial businesses are manufacturers, processors and exporters. They are not electricity generators and should not be expected to manage New Zealand's generation risk."

MEUG says placing the obligation on wholesale purchasers could increase costs for businesses, discourage electrification and ultimately reduce investment in New Zealand's economy.

"As more businesses electrify and expand, more could be captured by this obligation over time. That creates uncertainty for investment and risks becoming a disincentive to economic growth."

While supporting the Government's wider package of reforms to improve dry-year resilience, MEUG says the proposed long-term obligation is unlikely to deliver the investment in firm generation the electricity system requires.

"We agree the market needs intervention. The experience of winter 2024 showed the cost of not having enough firm generation available during dry years. But any intervention needs to be carefully targeted at the underlying problem."

MEUG is also concerned that the proposal relies heavily on Transpower's annual Security of Supply Assessment to trigger obligations, despite the assessment still requiring significant improvements before it can underpin regulatory penalties.

To support its submission, MEUG commissioned independent analysis from NZIER, which reviewed the likely impact of the proposal on wholesale electricity prices over the next five years.

Ms Boyes said the Government should undertake further consultation and a full cost-benefit analysis before finalising the scheme.

"This is one of the biggest electricity market reforms in recent years. Before proceeding, the Government needs to demonstrate that the proposal will deliver more firm generation, improve security of supply and avoid unnecessary costs for consumers."

"Our message is simple: put the obligation where it belongs. Generators have the expertise, incentives and ability to invest in the firm generation New Zealand needs."