NZX in gun over frozen payments

Two major power generators have lodged formal complaints against the NZX after it froze payments involving hundreds of millions of dollars on the electricity trading market.

The problem with the electricity trading market's clearing system comes just weeks before the stock market operator is to go live on its delayed clearing house for the stock exchange.

The NZX took over managing the clearing system for the electricity market last June as part of its $13.1 million acquisition of The Marketplace Company.

The Herald understands the "glitch" occurred on Friday after a small energy retailer failed to make a payment into the system resulting in the NZX freezing payments to all energy generators.

A spokesman for Genesis Energy said it had filed a notice of breach with the NZX after it failed to pay Genesis a "substantial sum" of money on Friday.

The money, which the Herald understands is around $80 million, was paid out on Monday.

"Genesis Energy believes the clearing manager was in breach of Electricity Market Governance rules and has taken appropriate action."

The spokesman described it as a "fairly serious issue" and said all power generators would have been affected.

Mighty River Power chief executive Doug Heffernan said it had also lodged a notice with the NZX over its clearing system management.

"We have followed through the normal process. We think a payment should have gone through rather than being held back. We have lodged a notice to the manager."

Heffernan said the problem had been exacerbated because the usual 20th of the month payment date had fallen on Friday and many had not realised there was an issue until late in the afternoon.

"Many didn't find out they were in overdraft until the start of the working week," he said.

Heffernan said power generators did not have a lot of cash sitting around and any delay in payments could send companies into the red.

Mighty River had been expecting to receive around $50 million. Heffernan said the failed payment situation was unusual and it had never happened under the NZX's management before.

"It shows the perils of a system that relies on a 20th of the month payment. What we want to make sure of is that the rules have been followed."

Heffernan said it could have been worse if it had happened at a time of high spot prices. "It could have been half a billion dollars which could have a significant impact."

"There has been a financial cost to us and other participants but what we are most worried about is the potential for it to happen again." The Electricity Commission would be expected to deal with the issue, he said.

A spokeswoman for the NZX said in accordance with its service provider agreement it would not be commenting about the issue.

The NZX is due to go live on its stock market clearing system on September 6 after missing an earlier deadline of July 26 because of delays to its regulatory approvals.

Once it launches the clearing house the company plans to expand into dairy and energy derivatives.

It suffered a major blow to plans for an energy derivative market in June when the five main energy players decided to ditch it in favour of the Australian Securities Exchange.

At the time EnergyHedge, which represents Meridian, Mighty River, Genesis, Contact and TrustPower, said it broke off talks with the NZX because of concerns over delays in launching its new clearing house and a lack of clearing participants.

POWER MARKETPLACE
* Energy companies use The Marketplace Company to trade.
* Up to 80,000 bids and offers are submitted daily.
* A glitch last week meant payments were frozen.