UTS 2 June 2016

UTS claim

We received a claim from Electric Kiwi that an undesirable trading situation (UTS) occurred on 2 June 2016.

The claim alleged a UTS was caused by Meridian Energy’s (Meridian) offer price increases while it was the pivotal generator during a period of high demand and scarcity of North Island reserves.

Our investigation

Electric Kiwi Limited lodged a claim that a UTS occurred during trading periods 35 - 40 on 2 June 2016, when electricity spot prices spiked above $4,000/MWh, far above the typical $100/MWh range. The claim focused on Meridian Energy’s offer behaviour, alleging it manipulated market conditions while acting as the pivotal generator.

Our investigation found Meridian’s actions were consistent with normal market operations, especially under tight and uncertain conditions. National demand was relatively high due to cold weather and the potential for significant price separation between the South and North Island had already been signalled. Similar offer strategies have been used by other participants without triggering a UTS. Additionally, other factors, such as an unscheduled generation outage and the behaviour of other generators, had comparable effects on market outcomes.

However, during our investigation we identified issues that required further investigation. We initiated a market performance review to assess whether the relevant Code provisions were achieving the intended outcomes, and whether risk management products in the hedge market were sufficient in their range and scope.

Our decision

We found that a UTS did not occur as there was no evidence that the event threatened the confidence in, or integrity of, the market.

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