UTS 29 June 2004

UTS claim

Norske Skog Tasman and Todd Energy submitted a claim that a UTS occurred in the North Island reserve market on 29 June 2004.

The claim concerned Transpower’s response to a grid emergency and its effect on the market.

Our investigation

On 29 June 2004, unexpectedly cold wet conditions in the upper North Island led to increased demand beyond that initially forecast. In addition, the Taranaki Combined Cycle Plant was not operating.

Transpower, as the system operator, advised market participants that there was insufficient standby reserves available for certain trading periods and declared a grid emergency.

In response to the emergency, Transpower manually set the requirement for reserves to be dispatched during the trading period to zero to meet demand. This action impacted energy prices. During the immediately prior period energy prices were approximately $1,000.

As no reserves were dispatched, reserve prices were effectively $0 per megawatt hour.

Both Norske Skog Tasman and Todd Energy made a UTS claim, alleging that market participants were adversely affected by the system operator’s actions.

During our investigation, we recognised that there were substantive issues raised by the UTS claims.

These issues concerned the operation of the reserve market, the non-dispatch of instantaneous reserves and the co-optimisation of the reserve market with the energy market.

We considered the claim and found that a UTS did not occur.

However, we recognised that the issues involved in this situation were complex and initiated further investigation.

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