In such situations markets may not operate efficiently. The market may also fail as a result of such interventions if price restraints prevent a supply and demand equilibrium. In such cases rationing must be employed. The events in Auckland and Queensland testify to the deficiencies of government operated and owned systems. The introduction of a market for electricity is among the most radical changes in economic management.
Competition is one essential condition to market efficiency.
Efficient markets also require secure property rights and rules that change only by mutual consent or with long lead times that allow investment decisions and contracts to be unwound. Changes in rules or regulatory seizures of property add risks that will reduce the investments firms make and cause commercial activities to be conducted in ways that are less than optimal. They may, for example, lead firms to concentrate on short term contracting because of concerns that longer term contracts will be overridden. It is these twin provisions of requiring minimal government intervention in markets with the requirement of stable regulatory framework that presents dilemmas for the operations of the electricity market. Changes in market rules will reduce the value of certain contracts that were undertaken in good faith, yet if the market rules are themselves bringing inefficient outcomes, some changes would appear to be necessary.