Services contract opportunity for commercial market making
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Tomorrow (Wednesday, 20 January 2021) we will release a Request for Information (RFI) which will help inform key decisions regarding the establishment of a commercial market making scheme for New Zealand electricity futures contracts.
The RFI outlines the design of the commercial scheme and seeks feedback on assumptions and aspects requiring further development.
It is important that market making services support a robust forward price curve and enable efficient risk management for the long-term benefit of consumers.
The Authority would like to hear from potential commercial scheme service providers - parties interested in providing commercial market making services under the commercial scheme. Respondents’ feedback will be considered as we set up a commercial scheme that efficiently meets the needs of New Zealand electricity consumers.
The RFI will be published tomorrow on GETS.govt.nz the New Zealand Government’s procurement portal and the Authority’s website.
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New EMI report shows ASX market depth for electricity futures contracts
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The current market making obligations on the ASX electricity futures market include requirements for market makers to provide quotes to buy and sell specified New Zealand electricity futures contracts. These quotes provide depth and liquidity in the market for participants trading on the ASX.
A new EMI report has been published that measures the average number of contracts available to trade on the ASX trading platform across trading sessions. Using data from ASX’s Market Data Protocol, the Authority can take detailed measurements of the state of the market throughout each trading session.
The new report is freely available and can be used to monitor how the depth of the futures market has varied over time, particularly as market making arrangements have changed.
The Authority is currently in the process of procuring additional commercial providers of market-making services following its decision on an enduring market making approach in August 2020.
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Stress testing regime – update to energy shortage scenario
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The Authority has updated the energy shortage stress test scenario in anticipation of expected spot price volatility in Q2 and Q3 of 2021.
A forecasted La Niña climate event is likely to cause an extended dry period in 2021 and there is also reported reduction in some gas supply.
This means there is an increased probability that the spot market will be impacted.
Given these factors, the Authority wants to ensure that wholesale market participants are aware of the potential for spot price volatility and are pro-actively managing their risk exposure.
The updated scenario assumes an average spot price of $400/MWh for the quarter. This is more reflective of current market risk compared to its previous setting at $250/MWh.
A reminder that test scenarios are hypothetical and are not forecasts. They are scenarios designed to ensure disclosing participants have considered the spot price volatility which may arise from rare, yet possible, risk events.
For more information please contact marketoperations@ea.govt.nz.
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Review of the electricity industry’s COVID-19 response
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The COVID-19 pandemic is an extraordinary event, with the effects of both the measures taken to contain the transmission of the virus and the virus itself, causing significant disruption to New Zealander’s lives.
In early 2021, the Authority will take the opportunity to explore the lessons learned through the 2020 lockdown periods. The Authority will review parties’ responses to the COVID-19 pandemic, with particular reference to the letters of expectation sent to participants in April 2020.
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Closure of five investigations
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We have completed investigations into the following alleged breaches of the Electricity Industry Participation Code 2010.
- Genesis Energy Limited was alleged to have breached clause 13.5A when it raised its Tekapo A generating station’s energy offer prices on several occasions during a period of islanded operation between 6 and 9 August 2018.
- Ventia NZ Operations Limited breached clause 10.38(a) by failing to maintain certification for metering installations for which it is responsible. Ventia also breached clause 20(2) of Schedule 10.7 when it failed to update the registry within 10 business days of the date of becoming aware of the expiration of certification for metering installations for which it is responsible.
- Genesis Energy Limited breached clause 11.15AB(4) on 10 April 2019 by approaching a customer during the switch save protection period in an attempt to persuade the customer to terminate their arrangement with a switch save protected trader. The attempt was successful, and the customer cancelled the switch.
- Simply Energy Limited self-reported that it had breached clause 10.7 by not using its best endeavours to arrange access to the metering installation for the metering equipment provider (MEP). However, Simply Energy had arranged for the MEP to have access to the metering installation and had not breached this provision.
- Transpower New Zealand Limited as the system operator breached clause 13.58A(1)(e)(i) and (2)(d)(i), and clause 13.69A from 28 to 31 March 2019. The breaches occurred after the system operator implemented a special protection scheme (SPS) automation project when the system operator used the incorrect default status of the SPS.
Notices of our decisions and reasons are available on our website.
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Registrations open for the Energy Trader Forum
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The first Energy Trader Forum of 2021 will be held on Thursday, 11 February at Te Wharewaka o Pōneke Wellington. The event can also be attended online for those unable to make it in person.
The Electricity Authority will provide an update on the High Standard of Trading Conduct review. Shane Dinnan – Head of Energy Markets at the NZX will talk about the pending NZX-EEX New Zealand ETS Auctions. Paulo Once will provide insights into energy management at Countdown, including applicable results from the new Energy Management Centre initiative. The forum will also include the usual quarterly market updates.
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Reminder: Call for nominations for the Security and Reliability Council
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We are calling for nominations for an independent chair and four members of the Security and Reliability Council (SRC). The SRC provides us with independent advice on reliability of supply issues, and on the performance of the electricity system and the system operator. The SRC comprises senior members of the New Zealand electricity industry, including consumers.
We are particularly interested in nominations from people who have experience in governance or management roles responsible for:
- electricity generation, particularly hydro, wind or thermal
- natural gas industry
- electricity distribution
- power system operations and performance.
We intend to appoint the successful nominees in March 2021 for an expected term of three years. Nominations close on 22 January 2021.
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Draft determination of the causer of the 4 February 2020 under-frequency event
Ending: 9/2/2021 5pm
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Level 7, Harbour Tower, 2 Hunter Street, PO Box 10041, Wellington 6143, New Zealand
Tel: + 64 4 460 8860 Email: communications@ea.govt.nz
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