Genesis hits back over price spike

Chief executive Albert Brantley. Photo / Supplied

Genesis Energy continues to swipe at firms it says took excessive risks and ended up exposed to enormous spot prices imposed by the state-owned enterprise in March.

The Electricity Authority is proposing that spot market electricity prices that spiked from Hamilton north for several hours on March 26 to around $20,000 a megawatt hour be cut to a maximum of $3000.

The authority yesterday confirmed a draft decision that events leading to the price spike were an undesirable trading situation (UTS).

The price spike happened when national grid operator Transpower closed part of the grid to upgrade lines into Auckland. The outages meant generation from Genesis Energy's Huntly power station was needed to support demand from Hamilton north.

After the price spike, 35 claims of a UTS were made to the authority relating to the behaviour of Genesis Energy.

The authority found that Genesis Energy's offer prices at the Huntly station set exceptionally high prices in the wholesale electricity market.

Chief executive Albert Brantley said Genesis Energy was concerned that the authority's decision rewarded businesses for poor commercial decisions about exposure to the wholesale spot prices.

"This decision tells wholesale market participants and contracted parties to take risks without facing the consequences of their actions. We are concerned that the decision is fundamentally at odds with the Government's stated goal to improve liquidity in the hedge market."

Brantley said Genesis would now consider the impact of the decision on its future commercial decisions for the dual coal and gas-fired units at Huntly.

"While many continue to ask that Genesis Energy maintain the availability of Units 1 to 4 for security of supply purposes, the market has signalled its unwillingness to meet the costs."

The company was reviewing the authority's decision in detail to determine its next course of action.

The authority found that Genesis Energy's conduct was not unlawful, did not constitute manipulative or attempted manipulative trading activity, and did not amount to conduct that was misleading or deceptive, or likely to mislead or deceive.

Although Genesis Energy had submitted its $19,000 to $20,000/MWh offers to the market the day before the price spike, forecasts of the spot market prices had failed to consistently predict actual prices. That was due to demand forecast inaccuracies in the price forecasting process.

The authority is consulting affected parties and expects to make a final decision around the end of the month.

The proposed $3000 offer price was intended to reflect the prices wholesale electricity market purchasers would have incurred had they received continuing forecasts of exceptionally high prices in the hours leading up to the UTS, the authority said.

If the high spot prices were allowed to become final prices, they threatened to undermine confidence in the wholesale market for electricity.

But the authority also noted that high offer prices into the spot market, and exceptionally high spot market prices, did not necessarily constitute a UTS.additional reporting

- NZPA