Meridian begged twice for cover during energy price spike

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Meridian Energy begged Genesis Energy to offer it lower-priced electricity during a March 26 incident that sent wholesale spot market electricity prices above $20,000 per Megawatt hour for about seven hours.

The detail of the day's actions by electricity generators caught out by the sudden price spike is contained in the final decision of the Electricity Authority confirming that the March 26 events did constitute an "undesirable trading situation".

Released this morning, the EA decision differs only slightly from its draft determination, by proposing to reset affected prices from that day at $3000 per MWh, rather than the initially proposed range of $1500 to $3000 per MWh.

The decision is now subject to a final round of submissions on the proposed price resetting, due by next Tuesday.

The decision also makes it clear that the EA regards the combination of "no genuine energy scarcity" on the day with the fact that prices were "not well signalled" as the key to the UTS finding.

"We are not saying there needs to be a lot of time but you would want to the offer prices well-signalled, even if late," said EA chief executive Carl Hansen at a press conference. Any future situations would be judged on a case by case basis.

Although Genesis had indicated prices above $19,000 per MWh for a short time on the day before the incident, "forecasts of spot market prices failed to consistently predict actual prices, due to demand forecast inaccuracies in the price forecasting process."

While such inaccuracies were common, they were unusually large on March 26.
The problem arose because of the impact of a planned transmission system outage, which exposed consumers north of Huntly to constraints.

A total of 35 complaints were received about the day's events from a wide range of major industrial electricity users and New Zealand corporations and non-profit organisations.

The decision confirmed that Genesis was not found to have acted manipulatively, misleadingly, or deceptively.

Details in the EA report show that between 1pm and 2pm, and again at 3.37pm, Meridian sought lower priced energy from Genesis through a short term hedge contract.

Genesis declined the first plea, but offered spot electricity at a still high rate of $10,000MWh on the second asking, but that Meridian turned that offer down.

Average wholesale market prices are consistently well below $100 per MWh.