New Zealand’s Electricity Commission was concerned about security of supply. More than 50 percent of New Zealand’s electricity comes from hydropower plants. In a dry year, output from these plants is reduced, meaning the country can run short of electricity, as had happened in 2003. The Commission had procured an expensive peaking-plant as reserve power source. However, there were concerns that the plant distorted signals in New Zealand market-driven system, deterring private investment—particularly because the plant was dispatched whenever the spot-power price exceeded NZ$200 per MWh. Moreover, it was still not clear what the optimal level of security of supply was, or how best to achieve it.