NZ's electricity market isn't deep and liquid enough to cater for hedging, PM Key says in response to Genesis price spike.
Prime Minister John Key said it was unfortunate New Zealand did not have a deep and liquid wholesale energy market as private businesses and other electricity companies reel from
a price spike by Genesis Energy that raked in NZ$56 million in seven hours.
Genesis increased wholesale electricity prices by more than 200 times the normal rate for seven hours just over a week ago, after Transpower announced it was shutting its lines into Auckland for maintenance.
A total of 14 organisations, including ASB, Telecom, Vodafone and the company that operates the Marsden Point oil refinery, have lodged complaints with the Electricity Authority over the spike.
The spike meant Mighty River Power had to pay fellow SOE Genesis NZ$25 million, Meridian paid NZ$12 million and Powershop paid NZ$1.7 million to access wholesale electricity for Auckland during that time.
Key said previously-announced energy market reforms would hopefully help the situation, but that everyone needed to acknowledge it was a highly illiquid market.
"It would be great if we had a liquid and deep market for hedging, but the reality is we don't," Key said at his regular post-cabinet press conference on Monday.
Genesis has rejected criticism of its actions.
Genesis' general manager for corporate affairs, Malcolm Alexander, said the company had been very clear to the market that it wasn't Genesis Energy's role to cover and pay for the spot market risk some market participants choose to take.
Alexander said Genesis offered hedges to cover the potential trading risk market participants faced from the outage as late as Friday afternoon and during the constraint itself.
- INTEREST.CO.NZ
