Electric Kiwi files 'UTS' complaint over Monday's electricity market failure
Thursday, 12 August 2021
Electric Kiwi has filed a complaint with the Electricity Authority alleging Genesis Energy and Contact abused market power and withheld generation in the run-up to Monday evening’s power cuts.
The independent retailer said an “undesirable trading situation” (UTS) had occurred, also accusing the companies of breaching the regulator’s trading conduct provisions.
The UTS complaint means the power emergency on Monday could now be subject to four separate reviews and investigations.
The others are an internal investigation by Transpower, another already announced by the Electricity Authority, and a third ordered by Energy Minster Megan Woods that will be carried out by the Ministry of Business, Innovation and Employment.
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Electricity spot market prices soared above $200,000 a megawatt-hour on Monday evening – which is about 600 times the price consumers normally pay for power – and above $100,000/MWh again on Tuesday morning.
Genesis chief executive Marc England has denied the company sought to profit by withholding generation on Monday.
He has said that while it considered firing-up the third coal-fired Rankine turbine at its Huntly power station on Monday morning after an initial amber warning from national grid operator Transpower over power supply and demand that evening, that appeared unnecessary at the time.
Transpower asked generators in that warning to check the information they had provided on their intended energy offers was accurate.
However, Transpower did not issue a formal notice to generators requesting they increase their energy offers to the market until 1.02pm on Monday, by which time information provided by Genesis suggested it may have been too late to crank up the generator in time to make a difference.
Electric Kiwi chief executive Luke Blincoe queried whether it was too late.
England said it was only when weeds blocked intake gates at Genesis’ Tokaanu hydro power station on the Tongariro River at the start of the Monday evening peak period and wind speeds then suddenly dropped that the actual crisis unfolded.
It has since emerged that the vast majority of the homes that lost power in the area served by Hamilton lines company Wel Networks did so because Transpower erroneously ordered Wel to cut the load on its network by 20 per cent, instead of by 1 per cent in response to the evening power shortage.
Electric Kiwi said in its UTS complaint that Contact Energy should also have had its Taranaki Combined Cycle (TCC) gas plant in operation on Monday.
“It may be argued that it takes several days to plan for the delivery of gas supplies, but the period in question is a 2½ hour super peak,” it said.
“We believe Contact could have reorganised their existing supplies and had TCC plus both peakers on for the critical period, without burning significantly more gas than they did.”
Contact Energy chief executive Mike Fuge rejected Electric Kiwi’s claims, saying it had all of its “available generation” on the market on Monday night.
That did not include TCC which took 72 hours to start generating, he said.
“TCC has not been operating since July 30.
“Based on demand forecasts we switched it off in order to prioritise renewable generation and use the water down south to generate at Clyde and Roxburgh to minimise water spill,” he said.
Electric Kiwi has requested the Electricity Authority respond to the alleged UTS by resetting wholesale prices as if Genesis’ third turbine and Contact’s TCC plant were in operation.
But Blincoe also repeated a call for structural reform of the industry.
The fundamental issue was that Genesis was basing its decision on the power it needed to generate to supply its own retail customers and meet its contractual obligations with wholesale customers, rather than the needs of the whole market, he said.
“This is another clear demonstration that companies that both generate and retail electricity don’t have the right commercial incentives to act in the interests of New Zealanders,” he said.
“26 years after the Bradford reforms it’s time to break up the generators for the benefit of Kiwi consumers.”
Genesis and Mercury Energy have offered $50 credits to customers who lost power on Monday.
Fuge said Contact was also “working to make sure any of our customers who were impacted by the outages on Monday night are fairly compensated”.
Electricity Authority spokeswoman Sally Taylor-Phillips said there was no provision under the Electricity Code for compensation, so that was a matter between electricity companies and their customers.
The authority was working on the issue of the spot market prices that applied during the period, another spokeswoman, Sally Aitken, said.
The Electricity Authority will next week finalise a fix for a separate UTS that it determined occurred in December 2019 when Meridian Energy spilled water from its Waikiti River hydro system that it could have used to generate power.