UTS 12 July 2005

UTS claim

On 12 July 2005, we received a claim by email from the Major Electricity Users' Group (MEUG) that a UTS existed.

The claim was about the potential exposure of electricity purchasers to very high prices, due to how frequency keeping services and related charges were operated.

Our investigation

This claim raised issues about future potential liability of purchasers, rather than an existing situation in the electricity market.

In its claim, MEUG raised concerns over potential spiralling frequency keeping and associated constrained on/off charges.

The system operator purchases frequency keeping services from contracted generators who can meet demand.

These contracted generators are selected for every trading period, based on the lowest offered base price, and are compensated for constrained on and constrained off generation.

This compensation is paid to generators by the system operator, who recovers the cost from all purchasers.

MEUG alleged that there was a possibility of unlimited liability for purchasers because of how compensation for frequency keeping was calculated based on a service provider's next tranche offer price.

Our decision

We concluded that the matters raised by MEUG did not satisfy the test for a UTS. In reaching this decision, we were mindful that there were already investigations and reviews underway examining similar issues.

Our full decision and analysis are included in our decision paper.