Online power market opens for business

By CHRIS DANIELS energy writer

A secondary market for electricity opens this week, with high hopes that it will provide solace for companies stung by soaring energy bills.

The online market opens for business this morning and the first trade, depending on retailer support, could take place later in the week.

Some power companies have reservations about how popular the new market will be, as it depends on big power users taking more of a risk on the electricity spot market.

But others have high hopes.

Energy Minister Pete Hodgson told a Wellington school principal faced with a skyrocketing power bill that such a secondary market could help her get cheaper electricity.

The new market will be run by energyauctions, a joint venture between an Australian online auction company and d-Cypha, a subsidiary of state-owned grid operator Transpower.

D-Cypha business development manager Chris Lee said the work had been done to establish the market and all that was needed was for electricity retailers to take part.

The market works in this way:

* Customers making energy savings offer a contract on the savings, using their power retailer as an agent.

* Companies or institutions forced to pay high spot prices bid for that contract on the website.

* The highest bidder at the end of the auction wins the contract.

Mr Lee said that it was envisaged that bigger companies would sell electricity saved, while smaller companies would buy it. No electricity would physically be transported.

A buyer on the market would enter a financial relationship with the power retailer selling the electricity on behalf of a customer.

Companies or institutions that spent at least $6000 a month would be most likely to sell their savings on the new market.

D-Cypha hopes organisations forced onto the spot market in recent weeks will go to the auction site and register interest.

Contact Energy spokesman Pattrick Smellie said the company had not yet been approached by customers wanting to take part in the secondary market.

But he said Contact, which has around 22 per cent of the retail market, welcomed anything that gave customers more choice.

"If they want it, we'll be into it."

Feature: Electricity

Energy Efficiency and Conservation Authority