Someone needs to nip around the Ministry of Business, Innovation and Employment and check the pulse on the officials advising on energy policy.
It was presumably they, rather than Energy Minister Megan Woods, who described a proposal for a 'low impact option' for ministerial intervention in the electricity andgas markets in the event of undefined 'market failure'.
By definition, such powers are unlikely to be anything but low impact.
Just suggesting them has the capacity to unsettle the justifiably skittish and increasingly rare captains of New Zealand industry who still work in the oil and gas sector.
One chief executive described it as "frightening", another as "nuts".
There was a certain amount of grim humour noting that the government's 2018 decision to ban new offshore oil and gas exploration has created the kind of huge constraint on the future of the gas market that could well precipitate a market failure at some stage.
However, the Petroleum Exploration and Production Association of New Zealand counselled its members to stay calm while it made inquiries. The policy review that will consider these issues won't be complete before the end of the year.
It could all just be an election year feint to keep the energy sector in line.
The phlegmatic and soon-to-depart chief executive of Contact Energy, Dennis Barnes, suggested it was all really about the strange combination of market conditions over the last 18 months that have seen previously low, stable wholesale electricity prices bounce all over the place.
That was partly because of low hydro-electric lakes – i.e., a lack of rain and snow – combined with some problems in the national grid – i.e., some unreliable wires – and finally some unexpected outages in the country's major gas fields – i.e., uncertain gas supplies at a time when gas was meant to be the backstop that keeps the lights on.
"I mean, we're close (to the gas market), and we don't know what's going on," he told BusinessDesk this week. "So a minister - I've got Fletcher Building or Glenbrook steel mill or someone in my ear telling me I can't gas or electricity's got so expensive…and I can't logically talk to the Minister about it.
"I can tell her what's caused it, but I can't tell her the root cause. I get that. I actually get that.
"My job is to make sure those powers are never used," said Barnes.
That said, other energy sector players suspect the whole idea of having such powers to threaten has been cooked up a few hundred metres from Contact's Wellington head office, either at the Meridian Energy HQ on the Wellington waterfront or at Transpower HQ in Wellington's Willis St.
"If electricity market participants are promoting this idea as a tool to keep electricity prices down, they should know better and look beyond their own short-term self-interests," said PEPANZ executive director John Carnegie.
In fact, the real target may in fact be the offices of Todd Energy, a stone's throw from the head offices of not only Contact, Meridian, and Transpower, but also the New Zealand HQ of OMV, the Austrian oil and gas producer that bought Shell's gas-producing Maui and Pohokura fields in 2018.
The most valuable part of Todd Corp, the conglomerate owned by New Zealand's billionaire Todd family, has prided itself forever in cloaking the true state of its gas reserves in mystery.
Yet, drill into the comments of everyone close to this issue and the message is the same: why doesn't the gas industry face similar disclosure requirements to the electricity sector?
Energy Minister Megan Woods. Photo / File
Clarifications provided by Woods's office certainly point that way.
"Market failure might occur where there is under investment in reliability in electricity or gas. This may be caused by information asymmetry or situations where industry participants don't face the real costs of supply failure," she said in comments supplied to BusinessDesk.
"The government is proposing changes to the Gas Act that would improve the flow of information," she said, "but is currently not proposing a fundamental review of institutional arrangements for the energy sector."
That sounds like low-impact reform, but Woods also suggests a "decision rights over allocation of scarce electricity or gas in an emergency is an example of what might be considered".
"Officials have been asked to engage with regulatory agencies and industry on identifying potential market failure and to propose possible remedies that are low impact in terms of investor confidence, the current energy work programme and other potential risks."
If not carefully handled, such talk could also be a signal to gas producers and major users to take great care before committing new capital to upgrading existing or new gas fields, or investing in new gas-fired industrial plant.
The key to preventing that is surely tougher disclosure rules, sooner rather than later.
Says Barnes: "I think the gas industry should be like the electricity industry. The information disclosures on the electricity industry are huge.
"If you think there's risk, be transparent about it."
