BSA Decisions Ngā Whakatau a te Mana Whanonga Kaipāho

Summary

[This summary does not form part of the decision.]

The Authority has not upheld a complaint that an item covering the Electricity Authority’s new trading rule breached the accuracy and fairness standards. The item was materially accurate, given its focus was the introduction of a new trading rule, motivated in part to address an undesirable trading situation (associated with Meridian Energy’s actions). It was not unfair to Meridian, as the programme was not inaccurate in how it presented Meridian’s contribution to the ‘revamped’ rule.

Not Upheld: Accuracy, Fairness

Background and the broadcast

[1]  In August 2020, the Electricity Authority (EA) appointed an investigator to investigate the alleged breaches of clause 13.5A of the Electricity Industry Participation Code 2010 by Meridian Energy in December 2019.¹ The alleged breaches concerned Meridian’s (pricing) offers when it was spilling water (which could have been used to generate electricity) during flood conditions in the lower South Island between 10 November 2019 and 16 January 2020. The EA ultimately found Meridian had no case to answer as it had complied with the safe harbour clause 13.5B. However, it also noted:²

Offers would normally be expected to result in lower prices in times of excess water. However, the investigation had highlighted that the safe harbour provisions had created a situation where maintaining offers at similar levels is not a breach of the trading conduct rules.

[2]  The EA considered the situation amounted to an ‘undesirable trading situation’ (UTS):³

The South Island had extreme rainfall, record high inflows in South Island lakes and South Island hydro generators had to spill excess water to manage water levels and flows. Water was abundant, cheap and available for generation. The [EA] considered the abundance of fuel (water) should have increased competitive pressure but the analysis of the UTS period undertaken by the [EA] shows it did not. Water was spilled that could have been used to generate electricity. Had this generation been dispatched, the [EA]’s analysis indicates that there would have been a significant impact on electricity spot prices and North Island fuel (water) would have been conserved to deal with impending outages. As well as adversely impacting the spot market, excess spill in the South Island thus increased security of supply risks in the North Island.

In short, the [EA] found that a confluence of factors reduced normal competitive pressure in the wholesale market during the period in question. This confluence of factors resulted in unnecessary spill and prices remaining abnormally high when compared against supply and demand conditions. The situation was of significant scale and duration.

[3]  On 2 June 2021, an item on Morning Report reported the EA’s new trading rule:

Reporter:  Electricity Authority says a new trading rule will prevent big power companies from raising wholesale power prices when there's a low level of competition. The Authority [has] revamped trading rules after complaints about Meridian and Contact causing a spike in prices while they were spilling water from South Island dams. The companies were cleared, largely on a technicality, and the new rules are set to be clearer and simpler. Electricity Authority Chief Executive James Stevenson-Wallace says it's never been able to refer a case to the rulings panel that is responsible for handing out fines under the existing rules.

Mr Stevenson-Wallace:   The whole emphasis on these rules is to target situations where one generator, because of various factors, they may find themselves in an increased level of market power. We believe that these rules make it very clear on what we expect of firms within that situation. And so in periods where you do find lower competitive pressures, these rules should reduce the ability of those firms to exert undue market pressure to increase prices.

The complaint

[4]  Meridian Energy complained the item breached the accuracy and fairness standards:

• The following statements were inaccurate:
  • ‘Meridian and Contact had recently caused a “price spike” in the market (Mr Beckford was referring to the events of December 2019)’.
  • ‘Under the Authority’s current trading conduct rules Meridian and Contact had been cleared “on a technicality” (again, Mr Beckford was referring to the events of December 2019).’
• Both comments were ‘not accurate in relation to all material points of fact (and a cursory examination of price levels over the relevant period[4] and the relevant Electricity Authority decisions[5] would confirm this, so it seems unlikely that RNZ made any efforts, let alone reasonable efforts, to confirm the accuracy of the comments made)’ and were ‘misleading’.
• ‘RNZ was deliberately attempting to convey to the audience that whatever the actual result of the investigation, in reality and in substance Meridian was guilty of breaching a high standard of trading conduct.’

The broadcaster’s response

[5]  RNZ did not uphold the complaint for the following reasons:

• ‘RNZ understands that a group of small power retail companies, which brought the complaint, asserted from the beginning, and have continued to do so, that the behaviour of the two big companies was materially responsible for the price spike in question.’ The item did not say what caused the price spike but ‘reported the nature of the complaint’, which was accurate.
• ‘With respect to the phrase "on a technicality" RNZ observes that the use of that term is not unreasonable in a spoken report for a general audience’.
• ‘The focus of this story was a rule reset by the Electricity Authority (EA). The brief news item was not a review, let alone an in-depth review, canvassing the issues which led to the EA taking this action. The item was one of one minute 10 seconds’ duration, in a business news bulletin, and a significant portion of the item was given over to audio of the Chief Executive of the EA speaking to the decision which had been made.’
• ‘Whether the description meets the pinpoint accuracy required by the complainant is not relevant, as it would not have affected listeners' overall understanding of the story which was that the EA had revised the rules governing electricity pricing.’
• ‘It is not clear from [the] complaint how…the item was unfair to Meridian as our earlier coverage made it quite clear that both companies did not breach the rules governing the standard of trading conduct because of the "safe harbour provisions”. The Electricity Authority has made the point that the safe harbour rules were hard to apply and could be used to shelter behaviour that did not meet the standard, [and it] subsequently reviewed the rules and abolished them.’
• ‘Throughout the whole issue Meridian has been contacted more than once by RNZ for interviews which were refused.’

The standard

[6]  The purpose of the accuracy standard⁶ is to protect the public from being significantly misinformed.⁷ It states broadcasters should make reasonable efforts to ensure that any news, current affairs or factual programme is accurate in relation to all material points of fact, and does not mislead.

[7]  The fairness standard⁸ requires broadcasters to deal fairly with any person or organisation taking part or referred to in any broadcast.⁹ It ensures individuals and organisations are dealt with justly and fairly and protected from unwarranted damage.

Our analysis

[8]  We have listened to the broadcast and read the correspondence listed in the Appendix.

[9]  The right to freedom of expression is an important right in a democracy and it is our starting point when considering complaints. We weigh the right to freedom of expression against the harm that may have potentially been caused by the broadcast. We may only intervene when the limitation on the right to freedom of expression is reasonable and justified, in light of actual or potential harm caused.

Accuracy

[10]  The standard is concerned only with material inaccuracy. For example, technical or unimportant points unlikely to significantly affect the audience’s understanding of the programme as a whole are not material.¹⁰

Meridian had caused a price spike

[11]  As submitted by RNZ, the item reported the Electricity Authority had ‘revamped trading rules after complaints about Meridian and Contact causing a spike in prices while they were spilling water from South Island dams’. This was reporting the complaints rather than reporting that Meridian had in fact caused a spike in prices.

[12]  Meridian argued this was also not what the complaints alleged and there was no ‘spike’ in prices at the relevant time. It provided charts showing daily average prices and monthly average prices, and submitted:

It is clear from both charts that prices during December 2019 in the South Island were among the lowest observed in the wholesale market in the last two years. In fact the monthly average for December 2019 in the South Island was, at $52.28 / MWh, the 4th lowest priced month in the last four years. It is inaccurate and misleading to therefore suggest that a ‘price spike’ (which implies prices were higher than average) was caused in that month.

[13]  However, we understand the allegation by the complainants was that due to the increased rainfall, Meridian’s prices should have been lower. Accordingly, it may be strictly inaccurate to describe complaints regarding inappropriately ‘maintained’ prices as complaints about ‘pricing spikes’. However, in the context of the broadcast, which was focused on the introduction of a new trading rule, motivated in part to address the UTS associated with Meridian’s actions, this was not a material inaccuracy.

[14]  Therefore this did not breach the accuracy standard.

Meridian had been cleared ‘on a technicality’

[15]  Meridian argued that the safe harbour provisions in clause 13.5B are not a ‘mere technicality’ but ‘are the primary means of demonstrating compliance with the required standard, are a fundamental part of the Code and explain what the Code requires by the words ‘high standard of trading conduct’:

In Meridian’s case the Authority decided not to refer the events of December 2019 to the industry Rulings Panel because Meridian, in the Authority’s view, had no case to answer as it had complied with the Code. More specifically Meridian had offered all of its generating capacity, it had submitted its offers as soon as it could and, in those periods when Meridian was pivotal and its generation was necessary to meet demand:

-  Meridian’s offers did not increase final prices;

-  Meridian’s offers were consistent with periods when it was not pivotal; and

-  Meridian did not benefit financially from higher prices.

These are important findings and are matters which go to the heart of what it means under the Code to observe a high standard of trading conduct. They are not mere technicalities as [the broadcast] inaccurately and unfairly claimed.

[16]  We reviewed the findings of the EA and the context of the broadcast. The EA found there was a UTS which arose in part from the conduct of Meridian. As reported, it ‘revamped’ its rules, to make them simpler and clearer, with a view to avoiding the type of conduct Meridian engaged in. In the broader context of the issue, it was not materially misleading to state Meridian was cleared ‘largely on a technicality’.

[17]  Therefore we do not uphold the complaint under the accuracy standard.

Fairness

[18]  Meridian’s concerns are primarily that its conduct was misrepresented in the item. We address this concern above under the accuracy standard. The reference to Meridian in the context of a short news item was brief, and given the lack of inaccuracies, it was reasonable for the broadcaster not to include comment from Meridian in this particular broadcast.

[19]  Appropriate comment from EA CEO James Stevenson-Wallace was included, which was relevant to the key point of the broadcast, the revamping of EA rules.

[20]  Therefore there was no breach to the fairness standard.

For the above reasons the Authority does not uphold the complaint.
Signed for and on behalf of the Authority

Susie Staley
Acting Chair
13 October 2021    

Appendix

The correspondence listed below was received and considered by the Authority when it determined this complaint:

1  Meridian Energy’s complaint to RNZ – 2 June 2021

2  RNZ’s decision on the complaint – 2 July 2021

3  Meridian Energy’s referral to the BSA – 28 July 2021

4  RNZ’s comments on the referral – 24 August 2021

5  Meridian Energy’s final comments – 6 September 2021

6  RNZ with additional material – 9 September 2021

7  RNZ’s confirmation of no further comments – 29 September 2021

¹ Electricity Authority (1 April 2021) “Notice of the Authority’s decision under regulation 29”
² As above, page 2
³ Electricity Authority (11 March 2021) “Consultation paper: Proposed Actions to Correct Undesirable Trading Situation 2019” <www.ea.govt.nz>
⁴ Electricity Authority, ‘Wholesale Reports’ <www.emi.ea.govt.nz>
⁵ Electricity Authority (17 August 2021) “Final Decision – Actions to Correct Undesirable Trading Situation” and (1 April 2021) “Notice of the Authority’s decision under regulation 29” <www.ea.govt.nz>
⁶ Standard 9 of the Radio Code of Broadcasting Practice
⁷ Commentary: Accuracy, Broadcasting Standards in New Zealand Codebook, page 18
⁸ Standard 11 of the Radio Code of Broadcasting Practice
⁹ Commentary: Fairness, Broadcasting Standards in New Zealand Codebook, page 21
¹⁰ Guideline 9b