Electricity Authority clears Genesis, Contact after August 9 power cut

The power cut on August 9 last year left 34,000 customers without electricity in the midst of a cold snap. Photo / 123RF

The Electricity Authority (EA) has cleared power generators Genesis Energy and Contact Energy of any wrongdoing arising from the August 9 power cut, which left 34,000 customers without electricity in the midst of a cold snap.

The investigation focused on three critical aspects of the event; the decisions made by Genesis and Contact in relation to certain generation assets; the system operator's management of the grid emergency; and the application of scarcity pricing.

The decision follows the Authority's investigation into the claim of an undesirable trading situation (UTS) by Haast Energy Trading, and Electric Kiwi, on August 12, and later joined by Flick Energy and Switch Utilities (Vocus NZ).

The EA decided that no UTS had occurred on the day.

The claim had alleged the UTS was individually and jointly caused by Contact Energy and Genesis Energy for not offering additional generation on the night of August 9.

Genesis Energy did not offer Huntly Rankine Unit 4 to the market and Contact Energy did not offer the Taranaki Combined Cycle station.

In a statement, Genesis chief executive Marc England said the decision, "like all conclusions drawn from previous investigations" confirmed that the company had acted appropriately on August 9 and did not breach the Electricity Industry Participation Code or cause a UTS.

"We have worked with Transpower and others in the sector, including taking part in a grid emergency preparedness exercise, to ensure the lessons learned from August 9 are applied in the future," England said.

A 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 EA's code.

The authority, in a previous review, said Transpower's co-ordination and communication failures meant consumers were disconnected unnecessarily on August 9.

Sarah Gillies, the EA's the general manager legal, monitoring and compliance, said the context in which the generating decisions were made was critical.

She noted that on the day, the country faced the largest demand peak on record in response to one of the coldest nights of the year.

"This was an extremely rare event and real time decisions were made in a difficult and uncertain situation," she said in the decision.

Gillies said the generation decisions made by Genesis and Contact on August 9 were in the range of what the market might normally expect based on the circumstances at the time.

"In the authority's view, these were rational decisions based on the information at the time and were within the range of what the market might reasonably expect in the circumstances.

"For that reason, these decisions did not threaten confidence in or the integrity of the market."

While Transpower's management of the grid resulted in consumers being disconnected, all those consumers were reconnected on the day.

"The authority concluded there was scarcity on 9 August and on that basis scarcity pricing was appropriate.

"However, the system operator and the authority agree the island shortage situation (ISS) notice was issued in error - the system operator requested reduced demand instead of instructing electrical disconnection before the ISS notice was issued.

"Regardless, the outcome was the same - consumers were disconnected in response to genuine scarcity."

The EA, an independent Crown entity, promotes competition and efficiency in the industry.