Electricity Authority launches market performance review

Electricity Authority launches market performance review, declines undesirable trading claim

The Electricity Authority’s Board has completed its investigation of Electric Kiwi’s allegation that an undesirable trading situation (UTS) occurred on 2 June 2016, when electricity prices briefly spiked to over $4,000 per megawatt hour (MWh).

The Board has concluded the event does not constitute a UTS and instead requested a market performance review. The review will look at trading on 2 June, as well as other similar events, and how the wholesale electricity market performed in regard to those events.

Carl Hansen, Chief Executive of the Authority says, “The Board reviewed a significant amount of analysis about the situation on 2 June. While this event is not a UTS, the investigation has highlighted a number of issues that need further analysis and consideration.

I would like to thank Electric Kiwi for proactively escalating this matter.

Our review will consider the performance of the electricity market and the conduct of all participants. In particular, we need to examine whether the market performed in a manner consistent with the Authority’s statutory objective of promoting competition, reliability and efficiency for the long-term benefit of consumers.”

In undertaking the market performance review the Authority reiterates that occasional very high spot market prices are desirable in New Zealand to provide a reliable and secure electricity supply. This is because ‘back up’ generation plants operate very little of the time and so they need to earn high prices when they operate to recover their costs.

In the electricity market, a UTS is a situation that threatens confidence in, or the integrity of, the wholesale market. A UTS must be a situation outside of the normal operation of the wholesale market.

The Authority Board determined that this claim did not meet the threshold for a UTS as there was no evidence the event threatened the confidence in, or integrity of, the market. It also noted that the behaviour that lead to the claim of a UTS was not an uncommon response by market participants to the types of risks it faced.

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