Electricity Authority to investigate ‘possible undesirable trading situation’

The Electricity Authority (EA) says it will investigate a possible undesirable trading situation (UTS) relating to August 9, 2021, following a recent High Court decision.

The High Court decided scarcity prices were incorrectly applied to four trading periods on August 9, 2021.

The EA says it will not appeal the decision and has directed its clearing manager to finalise prices for trading periods 37-42 without applying scarcity pricing.

The authority says it wants to ensure the sector and consumers continue to have confidence in the electricity market.

The EA considers the revised pricing gives rise to a new situation that warrants an investigation as a potential UTS.

Under the Electricity Industry Participation Code, a UTS is an event which threatens the confidence in, or integrity of, the wholesale market. It’s a situation that cannot be resolved under any other part of the code, says the EA.

“Opening a new investigation is the right action for the regulator to take given the circumstances,” says EA legal, monitoring and compliance general manager Airihi Mahuika.

“Spot prices have been determined by offers, in conjunction with demand management, in circumstances where scarcity pricing is arguably appropriate.

“This could amount to a UTS as prices may not reflect the underlying supply and demand conditions.”

The authority has directed the clearing manager to finalise prices for the relevant trading periods which were held interim while the appeal was heard.

The investigation into the possible UTS is expected to be completed by mid-2024.

The High Court ruling has been welcomed by Electric Kiwi and other parties involved, saying scarcity pricing stood to benefit electricity generators by about $130 million.