Large scale consumer stress tests

Stress test scenarios

There are two stress test scenarios for large scale consumers to compare their financial performance under the stress test scenarios to a business-as-usual or 'base case' situation, an energy stress test and a capacity stress test.

Consumers will require the following information to perform these stress tests:

• quarterly energy use
• hedge contracts in place
• quarterly revenues and costs (optional).

Note, these stress test scenarios are completely hypothetical. The prices being used are not forecasts and could be higher or lower than those set out above, even if events similar to these stress tests were to occur. The stress tests are a guide only and are not sufficient to meet the spot price risk disclosure requirements set out in the Code.

Stress test examples

Consider a hypothetical industrial consumer near Auckland, with a quarterly turnover of $1 million and electricity consumption of 20,000 kWh, 10,000 kWh of which is covered by a hedge contract priced at 11c/kWh.

For simplicity, this example assumes a flat consumption profile and partially hedged volume. If you are a consumer attempting to apply these stress tests and you purchase electricity (and particularly if you sell electricity) at more than one node (a location where spot prices are determined) then you should consider the risks of price difference across nodes. To do this, we suggest you use the stress test information in the scenarios tables.

If a flat consumption profile does not represent your electricity consumption, consider weighting your consumption for the stress tests, particularly the capacity stress test as this assumes 8 hours of peak usage.

Example 1: energy stress test

Under the base case scenario, a hypothetical consumer spends a total of $2,100 per quarter on electricity costs (excluding network costs etc), or around $715 per month. However, under an energy stress test with an average spot price of 25c/kWh. This rises to $3,600 per quarter, or $1,200 per month, reducing their overall profitability for the period by $1,500.

Under an energy stress test with an average spot price of 25c/kWh. The hypothetical consumer would see their electricity costs jump to $5,000 for the quarter if they were not hedged at all, compared with $2,200 if they were fully hedged at 11c/kWh.

Example 2: capacity stress test

Similarly, under the capacity stress test, despite the event affecting only 8 hours of consumption, a hypothetical consumer’s electricity costs for the quarter increase by over $360 (impacting its bill for a single month). These costs would be even greater for a consumer that used most of their electricity during the day (rather than having a flat consumption profile as assumed here).