Power regulator rejects price spike complaint
A complaint by independent power retailers about a wholesale price spike has been rejected by the Electricity Authority.
Flick, Pulse, Electric Kiwi and Vocus Communications laid a joint complaint last year, alleging an ‘‘undesirable trading situation (UTS)’’.
They said Genesis Energy, Contact Energy and possibly other market participants were required to disclose that their normal fuel supplies had been disrupted as a result of an outage at the Pohokura gas field, but did not do so.
In October, the average wholesale price hit $300 per megawatthour (MWh). That was almost three times the highest October monthly average previously recorded.
It hurt providers such as Flick in particular because those rises flowed through directly to customers on variable price plans.
Flick lost about 2500 customers to other providers. But other independent retailers were also put under pressure because the price they had to pay the generators for the power they sold increased so dramatically. Payless Energy quit the market.
Electric Kiwi chief executive Luke Blincoe said at the time that the Electricity Authority (EA) should step up.
‘‘By allowing current conditions to go unchecked, the EA is failing to regulate this sector with the independence and vigour necessary to fulfil its responsibility for promoting competition and the interests of consumers.
‘‘This inaction undermines confidence in the market, and ultimately demonstrates market failure.’’
Yesterday, the wholesale price was back down to between $17 and $82, depending on where in the country the power was being generated.
But the authority said it had investigated and concluded the episode was not a UTS. It said the perception of an information imbalance about the outage was larger than it really was.
‘‘We think this was largely caused by difficulty in accessing information regarding gas outages and other indicators of the gas supply situation.’’
The authority’s chief executive, James Stevenson-Wallace, said: ‘‘We didn’t find any evidence of anti-competitive behaviour. We have absolute confidence in the wholesale market.
‘‘We had low hydro levels, a compromised gas supply and increased demand for electricity.
‘‘Collectively, these factors led to the high prices, which some retailers and consumers felt more than others.
‘‘The electricity market operates in an ever-evolving space – there are always more challenges. Any participant in the market needs to understand those risks, plan ahead and manage them on behalf of their customers.’’
Blincoe was unimpressed. ‘‘This is another case of the EA looking for ways to do nothing,’’ he said.
‘‘The EA has a statutory objective to promote competition for the benefit of consumers – and that’s why independent power companies like Electric Kiwi will continue to hold both the regulator and industry to account.
‘‘Consumer interests are not well served with this decision.’’
Stevenson-Wallace said the investigation had shown the need for better disclosure of fuel information and improved tools to support liquidity in the market.
The authority’s report found Genesis ‘‘significantly altered its position’’ in the hedge market at a time when it had better information than was publicly available. It rapidly purchased hedge contracts in the 10 days before Shell made a public announcement on September 28.
But it said the information that Genesis had access to, while the best available, was not significantly better than that available publicly. Genesis had a legitimate commercial reason for purchasing October contracts.
The authority is now investigating potential breaches of the industry’s code in response to other allegations made by the claimants. The Australian Securities and Investment Commission has been notified of the allegations about trading hedges.