Retrospective action on electricity price spike raised

Monday 4th April 2011

Business representatives are suggesting retrospective Government action could be warranted to deal with a massive spike in wholesale electricity market prices on March 26.

Employers and Manufacturers Association (EMA) chief executive Alasdair Thompson today said one business had reported the price spike cost it an unbudgeted $180,000, while a small business told the association its electricity had cost an unforeseen extra $7000.

The Electricity Authority has started a market performance investigation into the price spike, when spot prices north of Hamilton rose to more than $19,000 per megawatt hour (MWh) for several hours, and reached $8000MWh in the lower North Island.

Mighty River Power, which is among those pursuing a correction of the prices, said normal prevailing prices were less than $100MWh.

The authority said a delay of final prices had been ordered for March 26, while claims of an undesirable trading situation were investigated.

Genesis Energy has countered criticism of its role in the price spike, saying that before a scheduled outage for routine Transpower maintenance on March 26 it had offered hedges to cover the potential trading risk market participants faced.

Prices offered into the wholesale market by Genesis Energy were designed to recover the costs of operating the expensive thermal power station at Huntly, which had high operating costs and declining use.

The EMA's Thompson said business wanted to know who made all the money from the price spike, estimated to be at least $50 million.

The issue was a test for the Electricity Authority, which might not have any power to do anything about it, Thompson said.

"The Government itself should therefore take retrospective action, which though something business never likes, may well be warranted on this occasion."

Many of the businesses who bought electricity at spot prices would not have realised the potential risk before the spike.

NZPA

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