Electricity market performance – A review of 2012
The Authority has published its second yearly review of the market - ‘Electricity market performance – A review of 2012’.
There are three highlights in the review:
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increased competition in the retail market
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increased activity on the ASX futures market
-
improved hydro management by the sector in response to the 2012 dry winter.
Evidence of increased retail competition includes measures of market
concentration and switching. The review shows the overall level of
competition in the retail market is one of reducing regional market
concentration, with some new independent retailer entry and growth
slowly having an effect on the market share of the main retailers.
Eighteen percent of customers switched retailers in 2012. This was
down slightly on 2011, but still very high and indicates customers
exerting pressure on retailers by voting with their feet.
The ASX futures market had an excellent year in 2012. Futures were
traded heavily in the lead up to the winter once the hydrological
situation became clear. This indicates participants are using the
ASX to manage their risk, which is exactly the outcome intended.
The winter included the driest first six months of the year ever
recorded. The market responded in ways that are encouraging.
Generators invested in new equipment to increase the amount of reserves
offered in the South Island, and acquired the offer rights for
interruptible load from the aluminium smelter at Tiwai Point. This
increase in reserves was needed to support southward flow through the
HVDC. The review outlines how this resulted in earlier flow south
than in the previous dry year, 2008, which had the effect of conserving
water in the South Island.
This evidence indicating that hydro storage was managed far more
conservatively than it was in 2008 is a sign that the changes resulting
from the 2009 Ministerial review have had a positive effect. Hedge and
spot prices reflected the hydrological situation, which meant that the
market received useful price signals of the near-term supply risks
arising from the low hydro inflows.
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