Authority Decides No Undesirable Trading Situation After High Court Ruling

The Electricity Authority Te Mana Hiko has decided no undesirable trading situation (UTS) arose following a High Court judgment released in February this year.

After investigating the situation and considering submissions the Authority decided final prices being determined by offers, which were depressed by demand management on 9 August 2021 (when 34,000 customers had their power disconnected) did not threaten confidence in the wholesale market.

"Our initial assessment was finely balanced and the input from the sector was important to assess market confidence to help inform the final decision," says Airihi Mahuika, General Manager, Legal, Monitoring and Compliance.

"We believe that the overarching concerns have been addressed by the investigation and the market can be confident that the Authority will consider exceptional situations where prices have been artificially depressed, or inflated, and take appropriate action where necessary.

"Consumers can have confidence that issues relating to the grid emergency on 9 August 2021 that were raised in reports and reviews into the event have been addressed to prevent a recurrence. In addition, the introduction of real-time pricing since the event means the precise circumstances that led to the situation cannot occur again.

"The Authority also lodged a formal complaint with the independent Rulings Panel in 2022 over Code breaches by Transpower, as system operator, in relation to its management of the grid emergency on 9 August 2021 which led to it being fined," said Mahuika.

Now that the UTS investigation is complete the Authority will direct the clearing manager to carry out settlement of final prices for trading periods 37 - 42 on 9 August 2021.

Background

In a judgment released on 16 February 2024, the High Court decided scarcity prices were incorrectly applied to four trading periods on 9 August 2021.

As a result, prices on 9 August 2021 were determined by offers and demand management by the system operator. The Authority considered the revised pricing gave rise to a new situation that warranted an investigation as a potential UTS.

Under the Electricity Industry Participation Code 2010, a UTS is an event which threatens the confidence in, or integrity of, the wholesale market. It’s a situation that cannot be resolved under any other part of the Code.

Notes:

The Electricity Authority is an independent Crown Entity with the main statutory objective to promote competition in, reliable supply by, and the efficient operation of, the electricity industry for the long-term benefit of consumers. The additional objective of the Authority is to protect the interests of domestic consumers and small business consumers in relation to the supply of electricity to those consumers.

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