Review of Stress Test regime

Some participants choose to purchase some or all of their electricity at spot market prices without obtaining hedge cover for occasional periods of high prices. This choice is more attractive when hedge prices are considerably higher than spot market prices.

The stress testing regime puts mechanisms in place for participants buying electricity on the spot market to analyse the risks they are taking, and disclose the level of risk they have decided to assume.

The regime requires certain participants in the wholesale electricity market to apply a set of standard “stress tests” to their market position, and report the results to their board and to an independent registrar appointed by the Authority.

The registrar collates the results and provides them to the Authority in a form that ensures individual participants are not identified. The Authority publishes a report of results (again in a form that does not allow participants to be identified). Participants subject to the stress test regime are able to review these reports and compare their own risk exposure with the position of other participants.

For further information see our stress tests page.