A Critique of Wolak’s Evaluation of the NZ Electricity Market: Introduction and Overview

This paper is the first in a symposium of papers that examine the 2009 report by Frank Wolak into the New Zealand electricity market. The Wolak report concluded that there had been a cumulative total of $4.3b (NZD) of overcharging in the New Zealand wholesale market over a period of seven years. In this paper, we introduce the Wolak findings in the context of the salient features of the New Zealand market, and explain that this headline figure is highly sensitive to some (quite unrealistic) assumptions about the structure of this market. The papers that follow this introduction (Hogan and Jackson, 2011, and Evans and Guthrie, 2011) examine Wolak’s methodology and its empirical application.