Electricity Authority looks to hedge contracts
The Electricity Authority has announced that it will soon be inviting proposals to establish and operate a financial transmission right (FTR) market in New Zealand.
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The Electricity Authority has announced that it will soon be inviting proposals to establish and operate a financial transmission right (FTR) market in New Zealand.
The authority's website described FTRs as a special type of hedge contract that allows parties to cover their price risk between two nodes on the national grid.
“Effectively, they are a type of insurance that protects wholesale market participants from half-hourly variations in spot market prices in one location versus another.”
The FTR initiative builds on the overall reforms in the electricity sector, the website said, particularly asset swaps, the what’s my number campaign, the review of prudential arrangements and developments in the ASX electricity futures market.
The establishment of an FTR market as a mechanism to help wholesale markets participants manage price risks caused by constraints on the national grid is one of the authority's top priorities under the Electricity Industry Act 2010.
Tendering for a market operation service provider to establish and operate this new market is seen as a key step towards achieving that.
The skills required include knowledge of and experience in running financial markets, an ability to work with parties in the industry and the authority to further develop FTRs and an ability to develop and operate a mathematical model of the electricity grid.
Colin Williscroft
Fri, 12 Aug 2011
Fri, 12 Aug 2011
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Electricity Authority looks to hedge contracts
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