UTS 10 November 2019

We concluded that a UTS occurred and took corrective action to rest prices.

This investigation involved considerable effort by participants and other organisations who contributed their views with a lot of technical information. We would like to thank all for their valuable time and insights.

UTS claim

On 12 December 2019 we received a claim from seven participants that an undesirable trading situation had begun on 10 November 2019 and was continuing at the time of the claim.

The claim alleged the UTS was caused by Meridian Energy (Meridian) and Contact Energy (Contact) spilling water from their hydro generation stations in the South Island, while simultaneously offering this generation into the spot market at prices above its short-run marginal cost.

Our preliminary decision

Our preliminary view was that confidence in or integrity of the spot market was threatened – or may have been threatened – and there was an undesirable trading situation between 3 and 18 December 2019 because:

  • Spot market outcomes differed markedly – for a sustained period – from what we expected given the underlying supply and demand conditions, and the scale of this difference was large.
  • The confidence in, or integrity of, the forward market may have been threatened, due to its close link to the spot market.

We found there was no other mechanism within the Code to resolve this situation other than via the UTS provisions.

Our investigation and analysis is detailed in the following preliminary decision paper. See also a technical briefing (slides and video) and the submissions received below.

Technical briefing - preliminary decision 2019 UTS

Supplementary consultation 

As a result of further information obtained in our investigation and consideration of submissions, we published the following supplementary consultation paper and received seven submissions.

Our consultation on corrective actions

After deciding that a UTS had occurred, we consulted on our proposed actions to correct the UTS and restore the normal operation of the electricity market.

Below is the consultation paper and associated technical briefing (slides and video), as well as the submissions received. (Here are the estimated nodal prices for each of the options in our consultation paper.)

Technical briefing - proposed actions to correct 2019 UTS

Independent assurance review

We commissioned an independent assurance review of the re-settlement process for the actions to correct the UTS.

Our final decision

We decided to reset prices between 3 and 27 December 2019 to correct the UTS and resettle the spot market.

We decided to impose a cap of $13.70/MWh on the offer prices made by nine South Island generating stations from 3 to 27 December, inclusive. Offer prices made at or below the cap level will be retained, while offer prices above the cap will be revised to the level of the cap. We will work with the system operator, the pricing manager, the FTR manager and the clearing manager to implement this resettlement.

The reasons for our decision are set out in the following decision paper.

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