Settlement and prudentials
Settlement and prudential arrangements are set out in part 14 of the Electricity Industry Participation Code 2010 (Code).
Part 14 covers:
- prudential requirements for participation in the market;
- the creation of invoices by the clearing manager (including invoicing for “washups”);
- settlement obligations;
- procedures to be used in the event of default;
- financial transmission rights (FTR) prudential requirements; and
- reporting obligations of the clearing manager.
Settlement of wholesale market transactions for a calendar month occurs on the 20th day of the following month, or if that day is not a business day then on the following business day. Those who have purchased wholesale electricity in that month (e.g. retailers) must pay the clearing manager for those purchases in cleared funds by 2pm on settlement day. The clearing manager then pays generators in cleared funds by 4:30pm on the same day.
The clearing manager determines the required level of prudential security that each participant must provide. The clearing manager determines that level by estimating its net exposure to a participant over a period of 55-60 days. If the clearing manager determines that its exposure to a participant is more than the amount of security the participant has already provided, the clearing manager will issue a call for additional security. The call must be satisfied within three business days.
Prudential security may take the form of a cash deposit, a bank guarantee, a third party guarantee from a party with an acceptable credit rating (see below), a bond from a surety with an acceptable credit rating, and/or a hedge contract lodged with and settled by the clearing manager. Parties with an acceptable credit rating (A- Standard & Poors or equivalent) do not need to provide prudential security.
The clearing manager service provider relationship
NZX holds the contract with the Authority to act in the clearing manager service provider role.
The clearing manager provides monthly and annual reports to the Authority.
Review of arrangements
The Authority has been reviewing settlement and prudential arrangements. See the Settlement and Prudential Review 2011-12.
HSA-Information-sheet-v20111004.pdf | pdf | 32 KB | Last Changed: 04/10/2011 12:08pm
Schedule-14.1-Alternative-form-of-bank-guarantee.pdf | pdf | 18 KB | Last Changed: 15/04/2013 6:56pm
This page is related to: Retail and Wholesale Market.