As expected, the first principal component weights all nodes approximately equally and so provides a measure of the overall level of prices across the NZEM.
Figure 5 shows that the extent of market integration varies over the course of the day, with the first principal component explaining at least 95% of the variation in (filtered) prices across the NZEM before 8:00 a.
Figure 6 provides information on where the NZEM segments.
The most notable feature of the eight graphs is that the NZEM was much more prone to segmentation in 1999 and 2000, with the market breaking up during the periods 5:00 a.
The top graph corresponds to the period (1997-1998) before competition in the NZEM was materially enhanced, the middle graphs relate to 1999 and 2000, and the bottom graph to the period 2001-2004.
Recall from Figure 7 that the NZEM was especially prone to break up into two or three parts during this period.
The MSC has primary responsibility for compliance activities within the NZEM.
The NZEM relies substantially on self-policing by market participants.
As the NZEM is an ISO with most services contracted out, the rules that govern its operation are complex.
The obvious point of comparison for the system of private ordering established under the NZEM rules is statutory regulation.
However, a salient feature in any comparison would be the advantage that the NZEM structure has in that it is an industry-developed solution--the industry is responsible for the design of the market, the content of its rules, the identity of its service providers and the costs of running it.
First, although the NZEM is not the product of an industry-specific regulatory regime, it is subject to general legal and regulatory constraints.