UTS ruling needs to go further

UTS RULING “NEEDS TO GO FURTHER” IN SETTING EXPECTATIONS AND PENALTIES

Mighty River Power today reiterated its support for the Electricity Authority’s draft decision to declare an Undesirable Trading Situation (UTS) on March 26, but has submitted that the final ruling needs to go further in setting clear expectations of market participants including penalties for future undesirable trading.

Mighty River Power Chief Executive, Doug Heffernan, said the decision would be “precedent setting” because Undesirable Trading Situations were rare.

“The quality of this decision is important in upholding confidence in the electricity market and also in protecting the integrity of the price discovery process. The final decision around this UTS will guide future market behaviour and outcomes.”

“We believe there are additional factors that need to be considered by the Authority when it resets prices in any UTS – such as the likely customer response to reduce demand when provided with better and earlier information of very high prices. We also believe that where a UTS is found by the EA and a party has been found to “squeeze” prices then the Authority should “remove the squeeze” by adjusting that party’s offers to pre-squeeze levels, otherwise it is in effect condoning the squeeze.” Dr Heffernan said.

“We don’t think that the Electricity Authority has gone far enough in its draft decision to set expectations of market participants’ behaviour and the penalties that would apply in these situations.” For the New Zealand Electricity Market to operate effectively and predictably, Dr Heffernan said there was a need for clarity “to ensure that in the future all participants are acting in the best interests of the market and that they understand there will be penalties if they do not behave appropriately”.

“It’s also important for existing and developing hedge, demand side and derivative markets that the underlying physical wholesale market operates effectively and predictably. “

Dr Heffernan said Mighty River Power had provided a detailed response to the Authority’s draft decision and would continue to support the process for the March 26 UTS through to a final decision expected in June.

ENDS.

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