New Zealand Introduces Winter Energy Reliability Obligation to Prevent Power Shortages

Kiwi households and businesses will be better protected from winter power shortages and price spikes as the Government makes the electricity sector take greater, permanent responsibility for securing the back-up power New Zealand needs, Energy Minister Simeon Brown says.

A clear obligation to keep the lights on: A new Winter Energy Reliability Obligation requiring major power companies and large electricity users to secure enough back-up energy ahead of a dry year.

Protecting against price spikes: Preventing the extreme price spikes that drove up power bills for Kiwi families and businesses in 2024.

Real consequences: Ensuring large power companies are held to account when they fail to meet their obligations.

Kiwis have been paying the price for an energy system run on the edge through higher bills and greater risk of shortages. This Government is fixing that by making the electricity sector take real, permanent responsibility for keeping the lights on.

Today, the Ministry of Business, Innovation and Employment (MBIE) begins consultation with the sector on a new Winter Energy Reliability Obligation. It will require large electricity buyers to lock in back-up supply well ahead of forecast dry winters – when lower rainfall reduces hydro lake levels and limits electricity generation – alongside requirements for generators to have firm fuel available if hydro storage runs low before winter.

By planning ahead for periods when hydro generation is constrained, the system will be more resilient, reducing the risk of outages and sharp price spikes.

This will boost investment, prevent the shortages that drove prices sharply higher for Kiwis in 2024, and help keep power bills more stable for households and businesses.

Dry-year risk sits with the electricity sector, not with taxpayers and not with households. It is only fair that the big power companies and large electricity users are the ones responsible for managing it.

Power companies, particularly the large gentailers, need to face real consequences when they fall short. That is why we are increasing penalties for serious rule-breaking from a maximum of $2 million to up to $10 million, or three times the commercial gain, or 10 per cent of a company's turnover – whichever is the greatest.

Kiwis should not be paying more because the big power companies run the system on the edge – those days are over.

The Winter Energy Reliability Obligation is part of the Government’s Securing Affordable Energy plan. Alongside potential additional back-up supply such as an LNG import facility, this obligation ensures the sector secures enough cover ahead of time, particularly during dry years when hydro generation is limited. LNG is one option alongside new generation, demand response, and storage to ensure a reliable power supply.

The Government will also amend the Electricity Industry Act to give the Electricity Authority a clear role in ensuring dry-year risk is effectively managed across the system. The Authority will also be required to report annually to the Minister on current and emerging security of supply risks, improving transparency and oversight.

In addition, the Government will update the Government Policy Statement (GPS) on electricity to set clear expectations that the Electricity Authority prioritise dry-year and wider security of supply risks, alongside reliability and affordability.

We are fixing the basics and rebuilding New Zealand's energy system after years of neglect, so that Kiwis can count on reliable power at prices they can afford. That is exactly what this Government is delivering.

Notes to editors: The Winter Energy Reliability Obligation has two layers. A long-term layer requires large electricity buyers to secure dependable winter cover where a shortfall is forecast years ahead. A short-term layer acts as a backstop, requiring large generators to show they have firm fuel cover if hydro storage runs low before winter.

The sector decides how best to provide cover, whether through generation, demand response, fuel procurement, or storage.

It forms part of the Government's Securing Affordable Energy plan and sits alongside a stronger role for the Electricity Authority and improved dry-year reporting.

MBIE has today released a discussion document for consultation, available here.