Market wary of sales scheme

By CHRIS DANIELS ENERGY REPORTER

Moves to set up a new secondary market for electricity are gathering pace, with a full internet-based system possible within two weeks.

But some power retailers doubt the idea will work, describing it as fine in theory but saddled with practical difficulties.

The new market, in which those who save power could then sell it back to those willing to pay, is being promoted by the state-owned electricity distributor, Transpower.

Transpower has set up a subsidiary, d-Cypha, to form a marketing joint venture with Australian company energyauctions Australia, which is owned by internet business-to-business auction company Lowest Bid.

Known as energyauctions New Zealand, the joint venture has already been trying to run a secondary auction market but power retailers have not been interested in taking part.

Transpower sales and marketing manager Bill Heaps said that if the scheme got off the ground, NZ would be the first country to operate such a secondary auction market for electricity.

Power retailers, such as Contact, Genesis or Mercury, would buy "saved" or unused power from their customers.

Large power users, who already buy electricity on the volatile spot market, could use this secondary market to buy the spare power more cheaply.

Energy retailers, however, are expected to raise some practical concerns with Transpower about how its market would work.

A key concern is that it would require changes to the way they bill their customers.

Under the Transpower plan, retailers and customers would need to reach an arrangement about the amount of power bought - not just the price of each unit used.

Only around 200 power users have this kind of contract.

A factory, for instance would have to buy 90 per cent of its power at a fixed rate but the rest on the spot market - where the potentially high prices would prompt the big savings.

Mighty River Power chief executive Doug Heffernan said this would mean customers agreeing to new, more risky contracts.

"The concept intellectually sounds interesting but the people who have designed it need to get closer to the practicalities for making it work," he said.

Over the past six weeks, big users were being paid for reducing their power consumption, at rates close to the spot market.

With the Transpower internet-auction scheme, the deal would be open to many more businesses, instead of the exclusively bilateral deals between retailers and key customers.

Trustpower acting chief executive Keith Tempest was more enthusiastic than Dr Heffernan about the scheme.

He said there were no great practical difficulties and nothing stopping Trustpower taking part.

Feature: Electricity

Energy Efficiency and Conservation Authority