Decision on alleged undesirable trading situation

Electricity Authority releases decision on alleged undesirable trading situation

28 February 2019

The Electricity Authority’s Board has completed its investigation of the undesirable trading situation (UTS) claim made by Electric Kiwi, Flick Energy, Pulse Energy, Switch Utilities (Vocus), and Vector.

The Board has concluded the event does not constitute a UTS. The Authority’s analysis and conclusions are detailed in the decision document.

Authority Chief Executive James Stevenson-Wallace says, “We didn’t find any evidence of anti-competitive behaviour. We have absolute confidence in the wholesale market.”

“The Board reviewed a significant amount of analysis about the situation from 14 September 2018 to 1 November 2018.”

“There is no disagreement that wholesale market conditions were unusually high in September and October 2018,” says Mr Stevenson-Wallace.

“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.”

Mr Stevenson-Wallace says the Authority is focused on making sure the right settings are in place for a competitive market in which consumers have choice and participants have a level playing field.

“There’s always room for improvement. We are constantly assessing the workability of the market and where we can make improvements to encourage participation and innovation. This investigation has reiterated the need for better disclosure of fuel information and improved tools to support liquidity in the market.

"We’re already planning some hedge market improvements and we intend to work closely with industry and agencies to improve the availability and accessibility of fuel information, including gas information.”

The Authority is now investigating potential breaches of the Code in response to other allegations made by the claimants. The Australian Securities and Investment Commission (ASIC) has been notified of the allegations about trading hedges.

The UTS decision document is on the Authority’s website.

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Notes

1. On Thursday, 8 November 2018 the Authority received claim of an undesirable trading situation (UTS). The claim was made by five parties – Electric Kiwi Limited, Flick Energy Limited, Pulse Energy, Switch Utilities Limited and Vector Limited. The claim relates to the period from 15 September 2018 onwards.

2. An undesirable trading situation (UTS) in the electricity market is an extraordinary event which threatens, or may threaten confidence in, or the integrity of, the wholesale market that cannot be resolved under the Code.

3. We investigate any potential undesirable trading situation and can take any action if we consider it appropriate. This could include suspending Code requirements and imposing new requirements on industry participants.

The Electricity Authority is an independent Crown Entity with a statutory objective to promote competition in, reliable supply by, and the efficient operation of, the electricity industry for the long-term benefit of consumers.

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