Glossary

2 | A | B | C | D |E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

2

2-hour rule

The 2-hour rule means that, without good reason, a generator or purchaser cannot alter a bid or offer within 2 hours of the electricity being dispatched.

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A

Act

Electricity Industry Act 2010

Electricity Industry Amendment Act 2022

Active power

Active power, measured in watts (W), is the product of the voltage and the component of current power in phase with the voltage.

AMI

Advanced metering infrastructure.

Ancillary service

The system operator contracts individual participants to provide five services essential to maintaining the common quality of electricity supply. These ancillary services are black start, over-frequency reserve, frequency-keeping reserve, instantaneous reserve and voltage support.

APERF

Asia Pacific Energy Regulatory Forum.

Appropriation

Money voted by Parliament to fund the operations of a government department or agency.

Asset

Equipment or plant that is part of or connected to the grid.

Asset capability statement

A statement provided to the system operator that outlines the capability and operational limitations of assets during both normal and abnormal conditions on the grid.

Asset owner

A participant who owns or operates assets used for generating or conveying electricity.

ASX

Australian Securities Exchange.

AUFLS

Automatic under-frequency load shedding. AUFLS is a form of extended reserve, used alongside instantaneous reserve to manage under-frequency events, such as an unexpected outage or the loss of multiple generating units, to limit the fall in frequency to within the limits set out in the Code.

Authority

Electricity Authority.

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B

Benmore

Benmore power station injects electricity at the southern end of the HVDC, and half-hourly prices at the Benmore node generally reflect the half-hourly prices across the South Island. Benmore is one of the three key reference nodes, along with Haywards and Otahuhu.

Black start

Some generators have the ability to black start meaning they can restart their generation plant with no electrical input if the system has blacked out. Generators without this capability require power from the grid to restart their generating plant.

Block dispatch

Block dispatch allows generators to receive dispatch instructions for a group of stations to be dispatched as a block. This allows them to decide how to implement the instruction within the block to manage their hydro resources efficiently.

Board

The Board of the Electricity Authority is made up of a chairperson and four to six members who have been recommended for appointment by the Minister of Energy and Resources to oversee the governance, operation and development of New Zealand's electricity market.

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C

Capability

Organisation needs in terms of access to leadership, people, culture, relationships, processes and technology, physical assets and structures to efficiently deliver the goods and services required to achieve the results sought—whether those results are set by reference to government policy or by statute.

Capacity margin

Winter capacity margin means the difference between a measure of expected capacity and expected demand from 1 April to 31 October between 7am and 10pm, expressed as a MW margin over demand.

Carbon charge

A low-level government tax aimed at reducing greenhouse gas emissions to meet New Zealand's international climate-change obligations.

Clearing manager

The market operation service provider (currently the New Zealand Stock Exchange) responsible for monitoring prudential security requirements and invoicing and settling electricity and ancillary service payments.

Code of practice

The codes of practice are those parts of the Code which cover the accuracy of metering installations, requirements for approved test houses, requirements of metering installations, data-logger requirements, requirements for data administrators and profile administration.

Code

Electricity Industry Participation Code 2010.

COMIT

The internet-based system that provides pricing and trading information for the New Zealand electricity market. COMIT is available by subscription from the provider, the New Zealand Stock Exchange (NZX).

COMIT free to air

The internet site that provides a snapshot of the information contained on COMIT, including prices, demand and hydrology. Freely accessible at electricityinfo.co.nz(external link).

Common quality

Common quality refers to those processes and technical requirements placed on asset owners and the system operator that impact on power system quality such as the Code requirements for system frequency management, system event management and system voltage management.

Competition, reliability and efficiency (CRE)

Components of the Authority’s statutory objective.

Connection contract

The contract between participants and the grid owner to connect to the grid at a point of connection.

Constrained-on compensation

An amount paid to generators if they are required by the system operator to generate during a trading period when the final price is less than the generator's offer price. The payment is calculated by the clearing manager and is payable by purchasers and the system operator.

Constrained-on prices

Constrained-on compensation is an amount paid to generators, if they are required by the system operator to generate during a trading period when the final price is less than the generator’s offer price. The payment is calculated by the clearing manager and is payable by purchasers and the system operator.

Constraint

A constraint occurs when a transmission line (or lines) reaches its maximum carrying capacity. When this occurs, the regions on either side of the constraint are considered 'islands' in price terms. One 'island' cannot supply any more electricity to the other, meaning demand has to be met by local generation plant.

Consumer

Any person who is supplied with electricity other than for resupply.

Consumption

The electrical energy consumed by a 1,000 watt (1 kilowatt) appliance in an hour is 1 kilowatt hour (kWh). A kilowatt hour is also known as a unit of electricity and is the unit in which retail sales of electricity are measured.

CPI

Consumer Price Index.

CRE

Refers to the competition, reliability and efficiency limbs of our statutory objective in section 15 of the Act.

CR X

Concentration Ratio (CR) of the top X number of generation/retailer companies (gentailers). The CR measures the sum of the market shares for the largest retailers—a higher number indicates a more concentrated market. For example, CR4 is the sum of the market shares for the top four parent retail companies.

Customer

A person who has agreed to purchase electricity from a retailer at a specific installation control point (ICP), for example, a domestic consumer.

Customer switching

Since the introduction of full retail competition to the New Zealand electricity market on 1 April 1999, customers have been able to choose their electricity supplier. Statistics(external link) are available on the number of customers who switch supplier and are published each month.

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D

DA - data administrator

Data administrators gather all metering information, prepare estimates for half-hour metering data, and aggregate metering data for reconciliation.

Default

Failure of a purchaser to pay for electricity purchased in cleared funds by 16:00 hours on the 20th day of the calendar month following the billing period. In the event of a default, the money that is unpaid is pro-rated among generators.

Demand-side initiative

An initiative that encourages or facilitates electricity consumers to modify their usage in a way that reduces consumption in a specific time period or shifts consumption from one time period to another.

Demand-side participants

Participants who modify their usage in a way that reduces consumption in a specific time period or shifts consumption from one time period to another.

Direct consumer

A consumer that purchases electricity from the wholesale (spot) market for its own consumption or a consumer with a grid connection, for example, a large industrial user.

Dispatch instruction

An instruction issued by the system operator to generators and ancillary service agents in accordance with the dispatch schedule.

Dispatch objective

The system operator has the objective of ensuring that generation meets demand at the least cost to purchasers.

Dispatch prices

Dispatch prices are forecast prices calculated in the 4 hours before dispatch takes place. Dispatch prices are produced in the schedule of dispatch prices and quantities (SDPQ) and are more accurate than prices from the pre-dispatch schedule (PDS).

Dispatch schedule

The schedule that the system operator bases dispatch instructions on to achieve the dispatch objective.

Distributor

A company that owns or operates the power lines that transport electricity on local low voltage networks. This term can be used interchangeably with 'distribution company', 'lines company' and 'network company'.

Domestic consumer

Users of electricity for personal, domestic or household use. This does not include users who purchase electricity for resupply (who are then retailers) or for use in production or manufacture.

DSBF

Demand-side bidding and forecasting.

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E

EIEP

Electricity information exchange protocols (EIEPs) provide a set of cost-effective standardised formats for business-to-business information exchanges between electricity industry participants.

Electricity Industry Act 2010

The Act that regulates the New Zealand electricity industry, and under which the Authority operates.

Electricity Industry Amendment Act 2022

The updated Act that regulates the New Zealand electricity industry, and under which the authority operates.

Embedded generation

A person that owns or operates generating units that inject electricity into a local or embedded network rather than to the national grid.

Emergency event

An emergency event is where there is a persistent shortage situation (weeks or months) and would include rolling outages or supply shortage declarations (both in Part 9 of the Code).

EMI

Electricity market information website: www.emi.ea.govt.nz(external link)

Energy margin

Winter energy margin means the difference between the expected amount of energy that can be supplied and expected demand during the period 1 April to 30 September, expressed as a percentage of expected demand.

Extended reserve

Extended reserve is a means by which to manage situations where the frequency of New Zealand’s electrical system falls too far below 50 Hertz without the fall being arrested by normal existing reserve products. Extended reserve responds if the frequency continues to fall after the normal reserve products have responded to prevent such a drop in frequency that could lead to catastrophic power system failure. Currently the only mechanism available is automatic under-frequency load shedding (AUFLS), which automatically disconnects blocks of load at specified frequency and time settings.

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F

FIR 

Fast instantaneous reserve. A type of instantaneous reserve that is available within six seconds of an unexpected generator or transmission outage. (Also see instantaneous reserve and SIR.)

FKC

Frequency keeping control.

Forecast price

Forecast prices are calculated from the pre-dispatch schedule (PDS) up to 35 hours ahead of the start of any half-hour period and every 2 hours from then until the start of the specific trading period.

Frequency

The frequency of the New Zealand grid is normally maintained at 50 hertz (Hz) frequency and is the number of cycles per second.

Frequency keeping

The frequency of the New Zealand grid is normally maintained at 50 Hertz and is the number of cycles per second.

Frequency keeping refers to the process used to keep the frequency of the grid within its normal band. Frequency keeping power stations are used to increase or decrease generation within a set band to ensure that supply equals demand on a second-by-second basis.

Frequency-keeping reserve or frequency regulating reserve (FRR)

An ancillary service that keeps the frequency of the grid within its normal band. The frequency-keeping station increases or decreases generation within a set band to ensure that supply equals demand on a second-by-second basis.

FTR - financial transmission rights

A financial risk management product that protects against price risks arising from transmission losses and constraints.

FTR manager

The FTR manager creates, auctions and allocates financial transmission rights (FTRs).

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G

Generator

An organisation that owns or operates generating units that inject electricity into a network.

GIP - grid injection point

A point of connection where electricity flows into the national grid from generating stations.

Grid

The high voltage electricity network, provided by State-owned enterprise Transpower that transmits electricity over more than 12,000km of transmission lines throughout New Zealand from generators to distributors and major industrial users.

Grid emergency

A grid emergency occurs when the system operator's ability to meet its principal performance objective (PPO) obligations is at risk, equipment or people are at risk or the system operator has to take urgent action to restore the PPOs.

Grid owner

The State-owned enterprise Transpower, the owner of the high voltage transmission grid, also referred to as the national grid.

GUP - grid upgrade plan

Plan to upgrade the high voltage transmission network, or national grid that transmits electricity throughout the country.

GWh - gigawatt hour

One gigawatt hour is equal to one million kilowatt hours. New Zealand's annual demand is approximately 38,000GWh.

GXP - grid exit point

A point of connection where electricity flows out of the national grid to local networks or direct consumers.

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H

Haywards

The location on the national grid at which the HVDC link is connected to the North Island. Prices at the Haywards node, located in the Hutt Valley, give a good indication of prices across the lower half of the North Island. Haywards is one of the three key reference nodes, the others being Benmore and Otahuhu.

Hedge contract

A financial risk management product or contract for sale and purchase of electricity that protects against price risks associated with the spot price of electricity. It sets a price at which a buyer will purchase a specific quantity of electricity at a specified node for a set period. The buyer pays this price regardless of whether the market price is higher or lower than the set price. Hedge contracts are also known as contracts for differences (CFDs).

Hedge market

A market through which hedge contracts are bought and sold. A hedge contract is a financial risk management product or contract for sale and purchase of electricity that shifts the price risks associated with the spot price of electricity. For example, a common hedge contract is a contract for differences (CFDs). CFDs set a price at which a buyer will purchase a specific quantity of electricity at a specified node for a set period. The buyer of the CFD pays this price regardless of whether the spot market price is higher or lower than the set price.

HHI

Herfindahl-Hirschman Index (HHI). HHI is a measure of market concentration and the relationship with competition occurs because less concentrated markets are likely to be more competitive. It is calculated as the sum of the squares of the market share of all participants.

HVDC - high voltage direct current

The HVDC link is the high voltage transmission cable that transports electricity in both directions between the North and South Islands.

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I

ICP - Installation Control Point

An ICP is a physical point of connection on a local network or an embedded network that the distributor nominates as the point at which a retailer will be deemed to supply electricity to a consumer. Each ICP is assigned an ICP identifier, which has the attributes set out in clauses 1 to 6 of Schedule 11.1 of the Code.

Impacts

The contribution made to an outcome by a specified set of outputs, or actions, or both. (Definition from section 2(1) of the Public Finance Act 1989.)

Infeasibility

An infeasibility occurs when the scheduling pricing and dispatch (SPD) model cannot produce a solution that is physically feasible. When this occurs, the SPD model flags the infeasible solution, and the system operator reconfigures the input information.

Information system

The software system required by the Rules to transfer information between participants, especially the uploading of bids and offers.

Installation control point (ICP) identifier

An ICP identifier is a unique identifier that is used in the registry to represent that point of connection, and is also used on consumers invoices.

Instantaneous reserve

Generation capacity and interruptible load that is made available to be used in the event of a sudden failure of a generating or transmission facility in order to maintain system frequency at 50 Hertz.

Instantaneous reserve is procured based on the size of the single largest contingent event that could occur during a particular trading period. Generators offer instantaneous reserves at the same time as they make energy offers.

Fast instantaneous reserve (FIR) is available within six seconds and must be able to operate for one minute. Sustained instantaneous reserve (SIR) is available within 60 seconds and must be available for 15 minutes.

Intermittent generation

Generation for which the source is intermittent and not easily predicted, for example, wind or wave generation.

Interruptible load

A type of instantaneous reserve that is provided by load that can be quickly disconnected, for example, hot water heating.

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J

Jade Software Corporation NZ Ltd

Jade Software Corporation NZ Ltd is the service provider contracted by the Authority to manage the registry database.

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K

kWh - kilowatt hour

A kilowatt hour is also known as a unit of electricity and is the basis of retail sales and reconciliation of electricity in the market.

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L

Levy

The charge on the electricity industry that funds the Authority.

Lines company

A company that owns the lines which transport electricity on local low-voltage networks. They are also called distribution companies or distributors.

Local network

The lines and substations used by distributors to transport electricity from grid exit points (GXPs) to points of connection with consumers.

Losses

As electricity travels through the national grid, a proportion of energy is lost as heat due to the resistance in the lines. The greater the distance the electricity travels and the lower the voltage of the line, the higher the losses are.

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M

MACQS - Multilateral Agreement for Common Quality Standards

The agreement that, until 1 March 2004, governed common quality standards.

MARIA - Metering and Reconciliation Information Agreement

The agreement that, until 1 March 2004, governed all aspects of the metering, registry and reconciliation process under bilateral trading arrangements.

Market operation service provider

There are eight market operation service providers engaged in the operation of the electricity market. The Authority contracts with other parties to provide the services:

• system operator
• reconciliation manager
• information system provider
• clearing manager
• FTR manager
• pricing manager
• registry.

MBIE

Ministry of Business, Innovation and Employment. MBIE is the policy adviser to Ministers on energy matters. MBIE also acts as monitor on behalf of the Minister of Energy and Resources regarding the Electricity Authority.

Meter

Equipment that measures and records electricity volumes conveyed through a point of connection.

MEUG - Major Electricity Users' Group

The industry lobby group representing major electricity users.

MFK

Multiple frequency keepers.

MFM

Market facilitation measures. These are actions that we can take short of amending the Code or recommending changes to regulations. This can include discussion with participants, education programmes, publication of guidelines and publication of model agreements.

MOSP

Market operation service providers.

MUoSA

Model use-of-system agreement.

Must-run dispatch auction

The must-run dispatch auction allows a generator to bid for the right to offer generation at zero price to increase the likelihood that it is dispatched. The auction is run daily by the Clearing Manager and offers a total volume equal to 80% of that day’s forecast lowest demand period to bidders. Generators can bid for the right to offer a MW quantity over some or all of the trading periods in that day at zero price. Generators will typically bid in the must-run dispatch auction when they need to run their plant to fulfil contractual obligations, comply with legal obligations, satisfy a technical minimum running constraint on their plant or for cost reasons.

MWh - megawatt hour

A megawatt hour is equal to 1,000 kilowatt hours. Megawatt hours are the metering standard unit for the wholesale market.

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N

National grid

The transmission network owned by State-owned enterprise Transpower that transports high voltage electricity from the major power stations to the local distribution networks and direct-connected consumers, operated by lines companies.

Network

The national grid, a local network or an embedded network.

NZEM - New Zealand Electricity Market

The multi-party trading arrangement under which, until 1 March 2004, the majority of New Zealand's wholesale electricity was bought and sold.

NZIER

New Zealand Institute of Economic Research.

NZX

The New Zealand stock exchange.

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O

Offer

An offer to sell a quantity of electricity at a specified price.

Offer stack

The stack generated by ranking, in price order, all the offers to sell electricity to the clearing manager.

One-in-60 dry year

A year in which there is a hydro drought of the severity that can be expected to occur every 60 years. The duration and timing of such an event will determine whether it has implications for security of supply.

Otahuhu

Prices at the Otahuhu node are used as an indicator of prices in the upper North Island. Otahuhu is one of the three key reference nodes, the others being Haywards and Benmore.

OTC hedges

Over-the-counter hedges. These are hedges traded off an organised exchange.

Outcome

Means a state or condition of society, the economy or the environment and includes a change in that state or condition. (Definition from section 2(1) of the Public Finance Act 1989.)

Outputs

Means the goods or services that are supplied by a Crown entity; but does not include goods and services that are produced for purchase or consumption solely within the Crown entity group. (Definition from section 136(1) of the Crown Entities Act 2004.)

Over-frequency reserve

An ancillary service that automatically reduces the level of injection from a generating set to stop an unplanned rise in the frequency.

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P

Participant

A person, or a person belonging to a class of persons, identified in section 7 of the Electricity Industry Act 2010 as being a participant in the electricity industry. These include generators, Transpower, distributors, retailers, other lines owners, consumers directly connected to the national grid, buyers of electricity from the clearing manager and service providers.

Payee

Any participant who sells electricity to the clearing manager or who is paid for ancillary services, administrative costs and FTR settlements.

Payer

Any participant who purchases electricity from the clearing manager or who pays for ancillary services.

PDS - pre-dispatch schedule

This schedule is produced by the system operator and includes expected levels of generation, instantaneous reserves, demand and forecast energy and reserve prices. If produced before 13:00 hours, the PDS covers the remaining trading periods of the day. If produced after 13:00 hours, it covers the remaining trading periods of the day and the trading periods of the following day.

PIF

Performance Improvement Framework.

Price

The New Zealand electricity market uses four types of prices - forecast, dispatch, final and real-time prices.

Pricing manager

The market operation service provider (currently the New Zealand Stock Exchange, NZX) contracted by the Authority to calculate and publish final prices.

Profiling/profiles

Profiling allows retailers to estimate how much electricity any consumer will use in each half hour by providing a typical consumption 'shape'.

Prudential security

Electricity can be consumed up to 57 days before payment for it is due. As a result, each purchaser is required to provide prudential security sufficient to cover this period, most commonly in the form of cash or a letter of credit, to cover the risk of not paying for this electricity on the due date. This ensures that generators are paid, even if a purchaser defaults. To ensure that sufficient security is held, the clearing manager monitors current and projected exposure on a daily basis using bids, cleared offers and final prices.

Purchaser

A company that buys electricity from the wholesale (spot) market.

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R

RAG

Retail Advisory Group.

Reactive power

Reactive power is the product of the voltage, current and sine of the phase angle and is measured in kilovolt-amps reactive (kVAr).

Real-time (5-minute) price

The price of wholesale electricity calculated for every five-minute period through each day.

Reconciliation

The process of matching the electricity supplied to customers by individual retailers with actual demand at a grid exit point.

Reconciliation manager

The market operation service provider (currently the New Zealand Stock Exchange) contracted by the Authority to undertake the monthly reconciliation process and take responsibility for reconciling metering data against a register of contracts and passing the data to participants.

Reference nodes

The three reference nodes are Benmore, Haywards and Otahuhu. Prices vary throughout the country by half hour, depending on the grid configuration at the time, so the prices at these nodes are considered indicative of electricity prices for the South Island, the lower North Island and the upper North Island respectively.

Registry

The database that identifies every point of electricity connection using an installation control point (ICP) reference, enabling energy flows between retailers to be reconciled. The registry also informs retailers when a customer switches supplier.

Reliability event

A reliability event is one where something has gone bang. Some power system asset has broken (with some risk to system security) and there may be lessons to be learned from the experience.

Reserve

Spare generating capacity or load reductions used to recover frequency immediately following a sudden generation or transmission line outage.

Retailer

A company that sells electricity to customers.

RS analysis

Residual supply analysis. This type of analysis is used to assess how much ability generators have to reduce supply and raise price to increase their profits.

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S

SCADA - supervisory control and data acquisition

The systems used by networks to collect and display information on how their system is operating on a moment-by-moment basis.

Scarcity event

A scarcity event is one where the power system didn’t (or nearly didn’t) have enough generation and/ or transmission assets available to meet demand for some short period (hours).

Service providers

Parties contracted by the Authority to manage the electricity system (system operator) and market services set out in section 5 of the Act.

Settlement

Settlement occurs on the 20th day of the month after trading occurred or if that day is a non-business day, the next business day, or in the event that invoicing information is not available, the day decided by the Authority. The clearing manager operates a clearing house, paying generators in full once all monies are received in cleared funds from purchasers.

SIR

Sustained instantaneous reserve. A type of instantaneous reserve that is available within 60 seconds and must be available for 15 minutes. (Also see instantaneous reserve and FIR.)

SME

Small and medium-sized enterprises.

SOI - Statement of Intent

The guiding document for a public sector body outlining its objectives, performance targets, and means of delivery against Government policy.

SOO - Statement of Opportunities

The Electricity Commission published statements of opportunities (SOO) to enable the identification of potential opportunities for efficient management of the grid, including investment in upgrades and in transmission alternatives. The most recent edition of the SOO was published in 2010. Publication ceased at the time the Electricity Commission was disestablished.

SOSPA

The system operator service provider agreement is the contract the Authority has with Transpower to operate the electricity system to schedule and dispatch electricity in real-time.

SPE

Statement of performance expectations.

Spot market

The buying and selling of wholesale electricity is done via a 'pool' for each half-hour for each grid point of connection, where electricity generators offer electricity to the market and retailers bid to buy electricity. This market is called the spot or physical wholesale market.

Spot price

The half-hour price of wholesale ('spot') market electricity published by the pricing manager.

SRC

Security and Reliability Council.

Station dispatch

Station dispatch allows generators to receive dispatch instructions for an entire station rather than by unit, enabling them to manage unit loadings individually to achieve more efficient operation of the plant.

Structure, conduct and performance framework (SCP)

Structure, conduct and performance is an organising framework for thinking about influence on market performance. It starts from the idea that the structure of the market determines the conduct of participants. This conduct drives outcomes. In the context of competition, it follows that the more competitive the structure, the more competitive the conduct of participants and the more efficient their performance.

This is a useful framework for considering reliability and efficiency because it underscores the need to take account of the context in which industry participants conduct themselves as well as the outcomes that their conduct produces. The SCP framework has the benefit of emphasising that outcomes are a function of a range of related influences and actions and thus no single measure provides definitive information on market performance.

System operator

The system operator (currently Transpower) is the market operation service provider responsible for scheduling and dispatching electricity in a manner that avoids fluctuations in frequency or disruption of supply.

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T

The Electricity Networks Association

The organisation that represents the interests of the electricity lines companies.

TPM

Transmission pricing methodology.

Transpower

The State-owned enterprise that owns the high voltage transmission network (the national grid) and acts as system operator.

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U

UOI

Unmatched open interest. UOI is an important measure of liquidity in the hedge market because it directly measures the volume of ‘live’ contracts on the exchange and indicates how useful the mechanism is to market participants. Higher UOI figures demonstrate more ‘skin in the game’ and provide more confidence about forward electricity prices.

UOSA - use of system agreement

Agreements that cover retailers’ arrangements with distributors for local distribution services. These can be interposed or conveyance agreements.

Utilities Disputes Ltd

Utilities Disputes Ltd is a separate organisation from the Electricity Authority. It provides consumers with a free and independent dispute resolution service for complaints about their electricity lines or retail company, provided that company is a member. See www.utilitiesdisputes.co.nz(external link)

UTS 

Undesirable trading situation. A UTS arises when there is a threat to orderly trading on the wholesale market or settlement that cannot otherwise be resolved satisfactorily under the Code.

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V

Voltage support

The ancillary service that injects reactive power into the system to boost voltage at the point of injection. Specific generation plant is contracted by the system operator to provide this service, when needed. 

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W

WAG

Wholesale Advisory Group.

Wash-up

The monthly procedure that revises an invoice where the information it was calculated on has been amended.

WITS

Wholesale information and trading system.