Market Competitive Intensity (MCI): New Zealand

Introduction

Datamonitor's MCI Index offers a robust framework for measuring the development of utility Market Competitive Intensity. The MCI assessment draws on nine underlying metrics grouped into three broad clusters: Market framework; Supplier Push; Customer Pull.

Scope

• *Insight into the current levels of competitiveness in the gas and power markets of 20 key Asia Pacific countries.
• *Benchmarking of the factors driving competition and market entry in the gas and power sectors of the selected markets.
• *Analysis of how the selected markets are likely to evolve given the currently prevailing market dynamics.

Highlights

• MCI scores are calculated using two different methods. The first, the simple weighted average (additive) measure shows overall competitive intensity. The second, the multiplicative method, is more complex. It prevents markets with an overly wide spread of underlying raw scores from exerting undue influence over, or skewing, the final result.
• Liberalisation, energy pricing issues and environmental concerns will remain key drivers of gas and power market dynamics throughout the MCI forecast period.

Reasons to Purchase

• *Assess the competitive environments of gas and power markets both now and in the future.
• *Gain insight into value chain factors driving market competitiveness and how each individual part of the chain will evolve as competition develops.
• *Screen future market entry plans against the MCI scores to highlight key areas of potential risk and opportunity.

• Datamonitor View
• Catalyst
• Summary
• Analysis
  • Introduction: Datamonitor's MCI Index offers a robust framework for measuring the development of energy Market Competitive Intensity
  • The MCI Index shows how attractive a particular market is to new entrants in terms of the competitive environment
  • The MCI assessment draws on nine underlying metrics grouped into three broad clusters: market framework, supplier push, customer pull
  • The MCI Index measures the development of 20 diverse Asia Pacific gas and power markets
  • The MCI Index assesses markets in December 2007, and on July 1, 2010, in addition to driving a market switching forecast
  • Each of the nine pillars has an assessment scale to allow for the comparison of diverse markets (see appendix for more details)
  • Two differing overall MCI scores are calculated to ensure full clarity of results
  • A simple weighted average (additive) measure shows overall competitive intensity
  • A weighted multiple (multiplicative) measure shows overall competitive intensity
  • The MCI framework has a number of applications for your organization
  • Context: New Zealand's gas and power markets both have strong Market Framework and Supplier Push factors
  • The New Zealand power market maintains its ranking over the forecast period
  • The New Zealand gas market is overtaken in terms of competitive intensity during the forecast period
  • Power MCI: The New Zealand power market is characterized by a wide range in its individual metric scores
  • Regulatory effectiveness is a key element of the New Zealand power sector
  • Effectiveness of regulator [2007: 8/10 2010: 9/10]
  • Effectiveness of balancing and data transfer [2007: 5/10 2010: 6/10]
  • Supplier Push scores are in the mid range of the scale
  • Wholesale market fragmentation [2007: 5.5/10 2010: 5.5/10]
  • Retail market fragmentation [2007: 5/10 2010: 5/10]
  • Traded market maturity [2007: 4.5/10 2010: 6/10]
  • in common with many other markets, New Zealand's total score is curtailed by weakness in the Customer Pull metrics
  • Access to market information and assistance [2007: 5/10 2010: 6/10]
  • 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
  • Consumer representation [2007: 2/10 2010: 3/10]
  • Gas MCI: Gas market competitive intensity shows improvement over the forecast period
  • 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
  • Effectiveness of regulator [2007: 4/10 2010: 9/10]
  • 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
  • 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
  • Ease of third party access [2007: 5/10 2010: 6/10]
  • 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
  • Effectiveness of balancing and data transfer [2007: 5/10 2010: 6/10]
  • Supplier Push metrics remain largely constant over the forecast period
  • Wholesale market fragmentation [2007: 5.5/10 2010: 6/10]
  • Retail market fragmentation [2007: 7/10 2010: 7/10]
  • A wholesale traded gas market does not yet exist in New Zealand
  • as with many other Asia Pacific countries, New Zealand has weak Customer Pull scores
  • Access to market information and assistance [2007: 1/10 2010: 2/10]
  • Consumer representation [2007: 1/10 2010: 1/10]
  • Consumer representation remains limited in New Zealand in the energy sector
  • Propensity to switch [2007: 0/10 2010: 0/10]
  • Outlook: Competitive intensity in the power market will continue to outstrip that seen in gas
• Mci Scores
  • Appendix
• Definitions
• Ask The Analyst
• List of Tables
  • Table 1: Market Competitive Intensity, New Zealand 2007-10
  • Table 2: MCI additive, Asia Pacific 2007-2010
  • Table 3: MCI multiplicative, Asia Pacific 2007-2010
• List of Figures
  • Figure 1: MCI assessment scale
  • Figure 2: MCI assessment framework
  • Figure 3: MCI market coverage
  • Figure 4: MCI scales
  • Figure 5: MCI Applications
  • Figure 6: Asia Pacific power Market Competitive Intensity, 2007-10
  • Figure 7: Asia Pacific gas Market Competitive Intensity, 2007-10
  • Figure 8: Power Market Competitive Intensity Index, New Zealand
  • Figure 9: Gas Market Competitive Intensity, New Zealand
  • Figure 10: Market Competitive Intensity, New Zealand
  • Figure 11: Scale for MCI assessment, effectiveness of regulator
  • Figure 12: Scale for MCI assessment, ease of third party access
  • Figure 13: Scale for MCI assessment, effectiveness of balancing and data transfer
  • Figure 14: Scale for MCI assessment, wholesale market fragmentation
  • Figure 15: Scale for MCI assessment, retail market fragmentation
  • Figure 16: Scale for MCI assessment, traded market maturity
  • Figure 17: Scale for MCI assessment, access to market information and assistance
  • Figure 18: Scale for MCI assessment, consumer representation
  • Figure 19: Scale for MCI assessment, propensity to switch