Mighty River seeks price correction after massive spike

Monday 28th March 2011 3 Comments

Mighty River Power is seeking a price correction, after estimating a massive price spike on Saturday could reduce its earnings by up to $25 million.

The company said it would be lodging a notice of undesirable trading situation with electricity market regulator the Electricity Authority.

That followed a period of about six hours on Saturday when Mighty River was exposed to buying electricity at wholesale prices more than 200 times higher than normal prevailing prices, Mighty River chief executive Doug Heffernan said today.

The undesirable trading situation process was an established mechanism for addressing abnormal market conditions, such as those on Saturday.

During maintenance outages on the national transmission grid in the upper North Island, market prices increased to about $20,000 per megawatt hour (MWh), more than 200 times higher than normal prevailing prices of less than $100MWh, Heffernan said.

That could have a financial impact of up to $25 million on earnings before interest, tax, depreciation, amortisation, and financial instruments, unless the prices were corrected.

Mighty River would be pursuing a correction of the prices as provided for under the existing electricity market rules. If successful that would eliminate any material impact on the company's earnings for the current period.

Transpower chief executive Patrick Strange said the rise in prices happened during routine Transpower maintenance.

Plenty of generation was available on both sides of the constraint during the work.

"The power system was perfectly secure. What you've seen is a pricing matter, which we can't comment on," Strange said.

"We as system operator and grid owner, would not continue with a constraint if the power system security was at risk, ie there wasn't enough generation."

Transpower gave plenty of notice of its maintenance work and did it at times when it had the least impact.

NZPA

Comments from our readers

On 29 March 2011 at 9:39 am Richard Brown said:

What cheek. Most consumers would like a 'price correction' too. Electricity is very expensive in New Zealand based on average incomes.

On 29 March 2011 at 3:21 pm Johan said:

What happened here is very non transparent and not clear to the average customer like myself. If there was enough energy generated and the demand was not unusual, that means for me that someone made big $$ out of this. As all costs land in the end on my utility invoice I would like to see this process clearly explained.

On 2 April 2011 at 12:52 am Graeme said:

So who were the benefactors out of this ? Another SOE, an Australian majority owned company or another player ? Agreed these costs have & always will by default land on the poor long suffering consumer as they have for quite some time. Time that the system was reorganised and full recognition came back to the fact that the bulk of the generators are indirectly by Joe Public who have already for the infrastructure many times over and then some more IMO