Authority proposes actions to correct 2019 undesirable trading situation

The Electricity Authority (Authority) today released a consultation paper on the proposed actions to correct the 2019 undesirable trading situation (UTS).

In December 2020 the Authority’s Board concluded there was a UTS between 3 and 27 December 2019. The decision followed a year-long investigation into a claim made by Haast Energy Trading, Ecotricity, Electric Kiwi, Flick Energy, Oji Fibre, Pulse Energy Alliance and Vocus (the ‘claimants’) in late December 2019.

The Electricity Industry Participation Code (Code) requires the Authority to attempt to correct a UTS and restore the market to normal operation as soon as possible.

James Stevenson-Wallace, Chief Executive of the Authority says “The Authority’s role is to develop and enforce market rules to give all New Zealanders confidence in the electricity market. The proposed actions to correct intend to restore confidence as soon as possible.

“There is no perfect solution – some of the consequences of the UTS cannot be undone. For example, we can’t un-spill water.

“What we propose to do is reset spot electricity prices for the period 3 to 27 December 2019."

The Authority is proposing to correct offer prices for the UTS period by capping offer prices at $13.70 MWh for nine South Island generating stations on the Clutha and Waitaki rivers.

“Based on this price, we’ve estimated the reduced cost of electricity is about $80 million for the December 2019 UTS period,” says Mr Stevenson-Wallace.

“How to calculate the offer price is a critical decision for the actions to correct. We’ve set out options in the paper and our preferred approach. We consider a capped offer of $13.70 MWh will result in average final prices that are broadly consistent with similar conditions in the past – noting the exceptional events of December 2019 were rare and the confluence of factors unprecedented.”

The $13.70 MWh capped offer is the same as the price used by the Authority to calculate the cost to clear the excess spill in the UTS decision paper.

The Authority has published various offer price options and the potential impact on participants. These are approximate and are based on preliminary simulations. The revised final prices would be determined by the Pricing Manager through the scheduling, pricing and dispatch model (SPD).

You can read the proposed actions to correct consultation paper, the Authority’s decision document, previous consultation documents and submissions on the Authority’s website.