Offer changes within the gate closure period

Background

Gate closure refers to the trading period ahead of when an offer for generation into the wholesale market is made and is effectively ‘locked-in’. No changes to the offer or per MWh dollar amount can be made within the gate closure period. There are strict requirements in the Electricity Industry Participation Code 2010 (Code) which outline when participants can or cannot make changes to their offers within the gate closure period. In addition, participants’ revised generation offers must first be deducted from the MW offered in the highest price band of the offer stack.

The Electricity Authority raised a breach notification under the Electricity Industry (Enforcement) Regulations 2010 against the participant when it made a bona fide offer revision for one of their generators. The participant failed to reduce the MW offer in its highest price tranches first, before reducing the MW offer in the lower-priced tranches.

At 3.00am the participant received a dispatch instruction to increase generation from 0MW to 6MW. The unit tripped on start-up. At 3.07am, the participant submitted a bona fide offer revision for the current and following two trading periods within the gate closure period.

The participant’s MW offer was revised down from 29MW to 8MW for each of the trading periods across three price tranches. The participant revised the MW offers in trading periods 7, 8 and 9 without first reducing the MW offered in the highest price tranches. The station was the marginal generator during several real time dispatch solutions in trading period 7 and set the price in those solutions.

Analysis

The following table shows the MW offer revisions for trading periods 7, 8 and 9 in the various offer tranches.

Clauses breached

The participant is alleged to have breached clause 13.19AA(b)(ii) by failing to first reduce the MW from the next highest price band when making a bona fide offer revision.

The participant reduced its highest priced offer tranche from 4MW to zero MW which was compliant with clause 13.19AA(b)(i).

However, in the next highest price tranche, tranche three it did not follow the same process. Instead, it reduced its offer from 6MW to 4MW when it should have been reduced to 0MW. This was not compliant and in breach of clause 13.19AA(b)(ii).

In its lowest price tranche, tranche two, the participant reduced its offer from 19MW to 4MW. If it had complied with clause 13.19AA(b)(ii) it would have reduced its offer from 19MW to 8MW.

Part 13 clause 13.19AA(b)(ii) requires a generator that submits a revised offer under clauses 13.18(1), 13.18(1A), or 13.19(1) during a gate closure period, to ensure the revised offer complies with the reduction in MW. The reduced MW specified in the revised offer must be deducted from the MW offered in the highest price bands in descending order.

The Authority assessed the market impact for trading period 7 as increasing South Island spot prices by $2.7 per MWh and North Island prices by $0.27 per MWh. This increased nationwide generation revenue by $2,283 and increased load cost to purchasers by $2,381. There was no market impact in trading periods 8 and 9.

Recommendations from the case study

Participants are reminded to be familiar with the relevant Code provisions concerning offer revisions.

The relevant Code provisions are set out below

Gate closure period

Gate closure period, in relation to a trading period for which a generator or ancillary service agent has submitted an offer or reserve offer, or for which a dispatchable load purchaser has submitted a nominated dispatch bid, means –

(a) the trading period to which the offer or reserve offer relates, and the trading period immediately preceding that trading period for–

(i) an embedded generator;

(ii) an ancillary service agent that is also an embedded generator;

(iii) a dispatch notification purchaser;

(iv) a dispatch notification generator; and

(b) the trading period to which the offer, reserve offer, or nominated dispatch bid relates, and the 2 trading periods immediately preceding that trading period, for–

(i) any other generator;

(ii) any other ancillary service agent;

(iii) a dispatchable load purchaser (other than a dispatch notification purchaser)

13.18 when a revised offer to be submitted

13.18(1) A generator, other than an intermittent generator, must immediately submit a revised offer to the system operator if the total MW specified in an offer exceeds, by more than 5 MW, the total MW that the generator expects to be capable of generating at the relevant point of connection to the grid for the relevant trading period.

13.18(1A) A generator, other than an intermittent generator, may submit a revised offer to the system operator if the total MW specified in an offer exceeds, by 5 MW or less, the total MW that the generator expects to be capable of generating at the relevant point of connection to the grid for the relevant trading period.

13.19 when revised offers may be submitted during gate closure period

13.19(1) a generator, other than an intermittent generator, may submit a revised offer to the system operator during a gate closure period if –

(a) the revision is necessary due to bona fide a physical reason; or

(b) the system operator issues a formal notice under clause 5 of Technical Code B of Schedule 8.3; or

(c) a bona fide physical reason that made a revision necessary under paragraph (a) ceases to exist sooner than was expected than was expected at the time it arose, and –

(i) the 1st trading period after the original bona fide physical reason ceases to exist is within 24 hours after the circumstances that constituted the original bona fide physical reason arose; and

(ii) the total change in MW specified in the offer that is revised as a result of the bona fide physical reason ceasing to exist is the same or less than the total change in MW specified in the offer that was made as a result of the original bona fide physical reason.

13.19 AA limitations on revised offers

A generator that submits a revised offer under clauses 13.18(1), 13.18(1A), or 13.19(1) during a gate closure period must ensure that –

(b) the revised offer complies with the following:

(i) the reduction in MW specified in the revised offer must first be deducted from the MW offered in the highest price band:

(ii) if the reduction in MW exceeds the MW in the highest price band, the remainder must be deducted from the price bands below the highest, in descending order as the MW in each price band is reduced to zero, until all of the reduction is reflected in the revised offer.

Summary of learnings

To prevent recurrence, the participant has taken the following steps:

1. Advised its staff of the issue and the Code requirements
2. Modify its offer tool to ensure compliant offer changes within gate closure
3. Included a pop-up check as an extra reminder before submitting the revised offer