Large scale consumer stress tests
These voluntary stress tests can act as a guide to help large scale consumers understand the extent to which their electricity bills might vary if they are exposed to spot prices.
The tests also allow consumers to see how their electricity costs during such an event would change if they were hedged for a smaller or greater proportion of their electricity use.
It is important to note however, that these stress test scenarios are completely hypothetical - the prices being used are not forecasts and could be higher or lower than those set out above, even if events similar to these stress tests were to occur.
These stress tests are a guide only and are not sufficient to meet the spot price risk disclosure requirements set out in the Code.
To perform these stress tests, you will require information on:
- your quarterly energy use
- any hedge contracts you have in place
- your quarterly revenues and costs (optional).
The stress tests specify two scenarios that allow consumers to compare their financial performance under the stress test scenarios, to a business-as-usual, or “base case” situation.
Our managing spot price risk guide has more information for large scale consumers
First scenario: the energy stress test
This test simulates possible conditions under an extended national drought, reducing hydro generation and resulting in high electricity prices.
Under this stress test scenario, the base case price of electricity is 10c/kWh and the stress test price is 25c/kWh. The scenario lasts for an entire quarter.
Second scenario: the capacity stress test
This test simulates possible conditions under a brief, but unexpected shortfall in generation capacity during a period of high demand, resulting in very high prices for a short period.
Under this stress test scenario, the base case price of electricity is 10c/kWh and the stress test price is 1,000c/kWh (or $10/kWh). The scenario lasts for eight hours during a period of peak usage.
Stress test examples
Consider a hypothetical industrial consumer near Auckland, with quarterly turn-over of $1 million and electricity consumption of 20,000 kWh, 10,000 kWh of which is covered by a hedge contract priced at 11c/kWh.
For simplicity, this example assumes a flat consumption profile and partially hedged volume. If you are a consumer attempting to apply these stress tests and you purchase electricity (and particularly if you sell electricity) at more than one node (a location where spot prices are determined) then you should consider the risks of price difference across nodes.
To do this, we suggest you use the stress test information on our stress tests page.
If a flat consumption profile does not represent your electricity consumption, consider weighting your consumption for the stress tests, particularly the capacity stress test as this assumes 8 hours of peak usage.
An example of the energy stress test
Under the base case scenario, that consumer spends a total of $2,100 per quarter on electricity costs (excluding network costs, etc.), or around $715 per month. However, under the energy stress test, this rises to $3,600 per quarter, or $1,200 per month, reducing their overall profitability for the period by $1,500. This is shown in Table 1 (the shaded cells represent numbers required from the user)
Table 1: Hypothetical consumer's energy stress test results
Under the energy stress case, the hypothetical consumer above would see its electricity costs jump to $5,000 for the quarter if they were not hedged at all, compared with $2,200 if they were fully hedged at 11c/kWh.
An example of the capacity stress test
Similarly, under the capacity stress test, despite the event affecting only 8 hours of consumption, the consumer’s electricity costs for the quarter increase by over $360 (impacting its bill for a single month). This is shown in Table 2. These costs would be even greater for a consumer that used most of their electricity during the day (rather than having a flat consumption profile as assumed here).
Table 2: Hypothetical consumer’s capacity stress test results