The Electricity Authority is proposing that spot market electricity prices that spiked from Hamilton north for several hours on March 26 to around $20,000 per megawatt hour (MWh) be cut to around a sixth of that amount.
The Electricity Authority is proposing that spot market electricity prices that spiked from Hamilton north for several hours on March 26 to around $20,000 per megawatt hour (MWh) be cut to around a sixth of that amount.
The authority today confirmed a draft decision that events leading to the price spike were an undesirable trading situation (UTS).
The price spike happened when national grid operator Transpower closed part of the grid to upgrade lines into Auckland.
The outages meant generation from Genesis Energy's Huntly power station was needed to support electricity demand for the area from Hamilton north.
After the price spike, 35 claims of a UTS were made to the authority relating to the offer behaviour of Genesis Energy at the time.
The authority found that Genesis Energy's offer prices at the Huntly power station set exceptionally high prices in the wholesale electricity market.
The parties exposed to those spot prices had good reason to believe Genesis Energy's offer prices would not translate into spot market prices, until it was too late for them to take any action to avoid paying those prices, the authority said.
Although Genesis Energy had submitted its $19,000 to $20,000
MWh offers to the market the day before the price spike, forecasts of the spot market prices had failed to consistently predict actual prices. That was due to demand forecast inaccuracies in the price forecasting process.
The authority is proposing to reset Huntly power station offer prices for the hours involved to $3000
MWh. It is consulting affected parties and expects to make a final decision around the end of June.
The proposed $3000 offer price was intended to reflect the prices wholesale electricity market purchasers would have incurred had they received continuing forecasts of exceptionally high prices in the hours leading up to the UTS, the authority said.
If the high spot prices were allowed to become final prices, they threatened to undermine confidence in the wholesale market for electricity, and threatened to damage its integrity and reputation.
But the authority also noted that high offer prices into the spot market, and exceptionally high spot market prices did not necessarily constitute a UTS.
Had the exceptionally high prices resulted from a genuine scarcity of electricity supply, and the high offer prices been well signalled in advance, it was unlikely to have found the events of March 26 were a UTS, the authority said.
It was important that price was used to signal scarcity to industry participants.
The authority found Genesis Energy's conduct was not unlawful, did not constitute manipulative or attempted manipulative trading activity, and did not amount to conduct in relation to trading that was misleading or deceptive, or likely to mislead or deceive.
